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Printer friendlyThe consequences of your failure to pay an unsecured debt
You may decide not to pay an unsecured consumer debt because of the expiry or anticipated expiry of a limitation period. It may be prudent for anyone who wishes to avoid paying a consumer debt on the basis of the expiry of a limitation period or the future expiry of a limitation period to seek legal advice.
In the event that you do not pay an unsecured debt for whatever reason there will be consequences. You might be sued. Your failure to pay a debt will almost always be reported to one of Canada's two credit reporting agencies, Equifax and Transunion and will have an impact on your ability to borrow money and at what cost in the future. In addition, there may be additional negative consequences to your failure to pay a debt.
You might be sued
If you do not pay your unsecured debt there is chance that you will be sued on this debt. If you are sued then your creditor will seek court costs, pre and post-judgment interest, and legal fees in addition to the balance owing.
Have a negative impact on your ability to borrow money and the cost at which you borrow money in the future
Your creditor will almost always report your failure to pay a debt to one or both of Canada's two major credit reporting agencies, Equifax and Transunion. Your failure to pay a debt that is reported to a credit reporting agency will harm your credit score. There is no fixed rule in terms of how long a derogatory comment will remain on your credit report. Typically, a derogatory comment on your credit report will be removed after six years.
When you apply for credit in the future potential lenders will look at your credit score from either Equifax or Transunion. Potential lenders will make the decision, whether to lend you money or not, as well as at what interest rate, based upon your credit score. The higher your credit score the better because you will be able to borrow money at lower interest rates.
Non-payment of a debt and consequences unrelated to borrowing money
Employers may sometimes obtain a copy of your credit report as part of their hiring process. If you have a bad credit report it may harm your chances of being hired. It is important to put this in perspective. Many Canadians have had problems paying their bills at some point in their lives so few individuals are going to have an unblemished credit history. It is possible that a poor credit rating may make it harder for you to get security clearance for some government jobs.
Some utilities may require individuals with poor credit histories to provide security deposits. In some cases insurance companies may refuse to insure people with poor credit histories.
