1) Will Debt Arbitration Stop Legal Action Against Me?

Creditors always have the right to use legal means to collect a debt. Creditor lawsuits are not as common as they once were but they still do happen. Some creditors are more likely to file suit than others.

More often than not it is the threat of legal action that is the most effective motivator in collecting money. It is a common tactic of third-parties like collection agencies to threaten such action (which is illegal if they do not intend to sue and do not have the creditor's authority). The reality is that collection agencies don't sue: the owner of the debt - the creditor - is the party who sues. And that's only going to happen if the collection agency recommends it to the creditor. In doing so, the creditor - who has to carry the legal expense which is largely non-recoverable - needs to know that there is a reasonable opportunity to recover the debt once he goes to court and seeks a Judgment. In other words, has the collection agency discovered where the debtor works, does the debtor own property or vehicles or other assets, where is the debtor's bank account? If the creditor doesn't know these things, he cannot easily attach wages or bank accounts or seize property. So on what basis is legal action recommended?

IIt becomes even more difficult for a creditor to sue when the debtor is trying to negotiate a settlement through a Debt Arbitrator. There is a strong element of good faith involved on both sides, and the creditor is directed by a limited Power of Attorney to deal directly with the arbitrator and not the debtor. Taking legal action while negotiating a settlement would be viewed by any Court as a serious breach of that good faith.

You should be aware that a creditor can only sue you if he retains an attorney that is in your province. So while there is no absolute guarantee that legal action will not be taken, the fact is that if you're being proactive in dealing with your debt the possibility of being sued is significantly reduced.

And whether legal action may or may not be taken, your account can be settled before, during or after the suit. Just because an account goes to court does not mean that we can’t settle it. IT CAN BE HANDLED. We recommend that our clients seek competent legal counsel in certain situations.

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