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Debra, Lawyer
Category: Canada Law
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Experience:  Lawyer
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As a person with a life threatening illness, I have fallen

Customer Question

As a person with a life threatening illness, I have fallen behind in my credit card and bank loan debt. I owe approximately $12,000. My last payment was two years ago. I live in British Columbia Canada. I am still being haunted by debt collectors. I understand the statute of limitations for being sued is two years. Of course my credit score has taken a big hit. If I ask the creditor for pay for delete of the debt for a lower settlement, say 40% of the debt, without acknowledging the debt, will the statute of limitations start over again? I am trying to find the best option to repair my credit as well as get these creditors off my back.
Submitted: 1 year ago.
Category: Canada Law
Expert:  MaryMeadenEsq replied 1 year ago.

Hello there --


If you negotiate a lower payment with any creditor, then that new agreement between you and the creditor becomes the operative agreement between you and replaces the original agreement (which means they can no longer pursue you for the original contract (the terms and conditions of the original contract are replaced). This means that the creditors can no longer pursue you through collections or sue you in court on the original agreement. If you negotiate a lower lump sum payment then make the payment, you have fulfilled the terms of the final agreement with the creditor and they cannot pursue you for anything in the original contract OR the negotiated lump sum second contract (because once the lump sum payment is made, the contract is legally fulfilled / Completed).


Finally just the act of trying to negotiate a reasonable lump sum payment on these debts is not legally sufficient to set aside the statute of limitation for a court action if the time period has already run out. However, if you negotiate another contract and start making payments under the new contract, then the statute of limitations for that debt will remain open until two years after the last payment on the contract is made. Also, just FYI -- if you are unable to negotiate a lower payment or principal balance (or both) and you make a payment anyway, then that action CAN act to start up the statute of limitations period all over again -- so if you want to avoid that happening, you are better off if you simply do not make any more payments on the original debt even if you are unable to negotiate a new contract with them.


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Expert:  Debra replied 1 year ago.

The question was moved to the Canada law list as it was on the US law list before. Please disregard the answer from the US lawyer. The laws are not always the same in both jurisdictions.

The limitation period starts over if you make a partial payment towards the debt. For this reason you cannot consider doing that until you have a final agreement in place that is signed and firm.

But if you are going to settle then you would include in your agreement a release from the prior debt and an acknowledgment that you only owe what is owing pursuant to this new agreement so that could not sue you for the prior amount. This release must be complete and detailed so that there is no way to sue you for the prior amount even if you default on the new contract.

Does that help as a starting point?

Customer: replied 1 year ago.
If I negotiate a lower payment for a settlement, will it remain on my credit report as "settled"? Will this impact my credit rating the same as "not paid"?
Expert:  Debra replied 1 year ago.

It won't really help your credit rate very much if you report the debt as settled. It will still remain on your record for the same length of time unfortunately.