How long does a debt stay in collections in Canada?

Collection accounts remain on your credit report for 6-7 years from the date of last activity (depending on province). The statute of limitations for legal action is 2-6 years depending on the province, after which the creditor cannot sue you.

Should I pay a collection agency?

If the debt is legitimate and within the limitation period, paying or settling protects you from legal action. However, paying an old debt can restart the limitation period and may not immediately remove it from your credit report. Consider negotiating a pay-for-delete agreement.

Can a collection agency garnish my wages in Canada?

A collection agency cannot garnish wages directly. They must first sue you, win a court judgment, and then seek a garnishment order. However, CRA (for tax debts) can garnish wages without a court order.

How to Deal with Collections in Canada: A Complete Guide (2026)

Understanding Collections in Canada

What Happens	Timeline
Original creditor	You miss payments
Internal collections	Creditor tries to collect (0-6 months)
Sold to collection agency	After 90-180 days typically
Collection calls begin	Once agency receives account
Credit bureau reporting	Collection appears on credit report

Your Rights When Dealing with Collections

Collection Agencies Cannot:

Prohibited Action	Regulation
Call before 7am or after 9pm local time	Provincial law
Call on statutory holidays	Provincial law
Call your workplace after being told not to	Provincial law
Threaten or harass you	Criminal Code
Provide false information	Provincial law
Contact you if you have a lawyer	Must communicate through lawyer
Add unauthorized fees	Can only collect contracted amounts
Garnish wages directly	Requires court judgment first

Collection Agencies Can:

Permitted Action	Notes
Call you at home	Within permitted hours
Send letters	At your address
Report to credit bureaus	Legitimate debts
Sue you	If debt is valid and within limitation period
Negotiate settlements	Often accept less than full amount

Statute of Limitations by Province

Province	Limitation Period
Ontario	2 years
BC	2 years
Alberta	2 years
Quebec	3 years
Nova Scotia	6 years
New Brunswick	6 years
Manitoba	6 years
Saskatchewan	2 years
Newfoundland	6 years
PEI	6 years

After limitation expires: Collector can still ask for payment, but cannot sue you to collect.

Step-by-Step: Dealing with a Collection Call

Step 1: Don’t Panic

Do	Don’t
Stay calm	Agree to pay immediately
Take notes	Provide banking info on first call
Get information	Make promises you can’t keep
Ask for verification	Ignore the call completely

Step 2: Request Debt Verification

Ask For	Why
Original creditor name	Confirm legitimacy
Account number	Match to your records
Original amount	Know what you actually owed
Current balance breakdown	Interest, fees itemized
Written verification	Required within 5 days of request

Step 3: Verify the Debt Is Yours

Check	How
Is it your debt?	Match account details to your records
Is the amount correct?	Review original statements
Is it within limitation period?	Check your province’s limit
Has it been paid?	Check your bank records

Step 4: Decide Your Strategy

Situation	Strategy
Debt is valid and recent	Negotiate payment or settlement
Debt is old but within limitation	Negotiate settlement (may accept 30-50%)
Debt is past limitation period	Know your rights, consider ignoring
Debt is not yours	Dispute formally
You cannot pay at all	Consider credit counselling or insolvency

Negotiating with Collections

Settlement Offers

Typical Settlement	Scenario
50-70% of balance	Recent debt, lump sum available
30-50% of balance	Old debt, lump sum available
Full balance over time	Payment plan, no settlement

How to Negotiate

Step	Action
1	Start lower than what you can afford
2	Get any agreement in writing before paying
3	Request “pay for delete” (agency removes from credit report)
4	Pay by cashier’s cheque or money order (paper trail)
5	Keep all records

Sample Settlement Letter

Item	Details
Your information	Name, address, account number
Settlement amount	“$X as payment in full”
Agreement terms	Debt will be reported as “paid” or “settled”
Written confirmation	Required before sending payment

Impact on Your Credit Score

Action	Credit Score Impact
Debt goes to collections	-50 to -100+ points
Collection account reported	Stays 6-7 years
Paying the collection	May not immediately improve score
Pay for delete success	Removes negative item
Debt settlement (without deletion)	Still shows as negative item

Disputing Invalid Debts

With the Collection Agency

Step	Action
1	Send written dispute letter
2	Request verification of debt
3	Agency must stop collection until verified
4	If not verified, must stop collection

With Credit Bureaus

Step	Action
1	File dispute with Equifax and TransUnion
2	Provide evidence debt is invalid
3	Bureau investigates (30 days)
4	If verified incorrect, removed from report

When to Get Help

Situation	Help Type
Multiple debts	Credit counselling (free)
Can’t afford minimums	Debt management plan
Overwhelming debt	Consumer proposal
No way to pay	Bankruptcy (last resort)
Being sued	Legal advice