What Happens If You Do Nothing About Your Debt?

Ignoring debt might feel easier in the moment, but the longer you leave it untouched, the bigger the problems become.

Interest piles up, calls from collectors keep coming, and your credit score quietly takes the hit. Some people even wonder if their debt will just disappear if they don’t deal with it — but in reality, the opposite happens.

Doing nothing can lead to frozen bank accounts, wage garnishments, asset seizures, or years of financial stress that could have been avoided.

In this post, we’ll walk through exactly what happens if you do nothing about your debt, what collectors can and can’t do, and how to protect yourself before things spiral.

If you’re already feeling overwhelmed, you’re not alone — there are options to find debt relief and take back control.

Why Ignoring Debt Is a Risk You Can’t Afford

Debt Doesn’t Vanish — It Grows

Debt is one of those things that snowballs if you leave it alone. Missed payments mean late fees, interest charges, and even over-limit fees if it’s a credit card. That $500 balance you thought you’d “deal with later”? Before long, it could double and leave you wondering how it got so high.

Credit Damage Is Hard to Rebuild

Once you start missing payments, your credit score feels the impact. And the tough part is that these negative marks don’t go away quickly, they can stay on your record for years. That makes it harder to get approved for loans, mortgages, or even a new cell phone plan. It’s fixable, but repairing credit takes time and consistency.

Legal & Financial Consequences Loom

If a balance goes unpaid long enough, creditors can take legal action. That might mean a court judgment, wage garnishment (where they automatically take money from your paychecks), or even a frozen bank account.

The Canada Revenue Agency (CRA) has even more power to collect tax debts. The point is: if you do nothing, creditors eventually step in and make the decisions for you.

What Debt Collectors Can and Can’t Do

Persistent Calls and Letters Are Common, But Harassment Isn’t

If you’re late on payments, expect calls and letters from collectors. That’s their job. But harassment is not allowed. There are clear rules about when and how often they can contact you. You can also request that communication happen in writing or at specific times.

Can Debt Collectors Freeze Your Bank Account?

A common worry is, “can debt collectors freeze my bank account?” The short answer is no, not right away. Collection agencies can’t just take money without a legal process. To freeze an account or garnish wages, creditors typically need to go through the courts.

If you’ve received notice of legal action, that’s when it’s time to act fast.

You Don’t Go to Jail, But There Are Other Costs

In Canada, you don’t go to jail for unpaid consumer debt. Jail is for criminal issues, like fraud or ignoring a court order, not for missed payments. However, the financial consequences are real: lawsuits, liens, wage garnishments, and years of financial stress.

Ignoring Debt vs. Taking Action

Leave It Alone, Watch It Grow

Ignoring debt is like leaving a leaky faucet. It doesn’t stop on its own, it just adds up and costs more over time. Not to mention, the stress of avoiding phone calls and worrying about what’s next can take a toll on your health and peace of mind.

Orderly Payment vs. Bankruptcy vs. Consumer Proposal vs. Debt Consolidation vs. Credit Counselling

Taking action means you get options.

Debt consolidation combines multiple debts into one loan with a single monthly payment, often at a lower interest rate.

Credit counselling offers budgeting help and may include a debt management plan to repay creditors over time.

Orderly Payment of Debt (OPD) — available only in some provinces — rolls your balances into one manageable court-approved payment with fixed interest.

Consumer proposals, filed through a Licensed Insolvency Trustee (LIT), let you reduce what you owe, freeze interest, and stop most collections.

Bankruptcy, while often a last resort, can provide a fresh start when other solutions aren’t enough.

Financial Touchpoints You Could Lose Control Over

Credit Score, Loans, Mortgages

Unpaid debt tanks your credit score, which means higher borrowing costs or even being denied for new credit altogether. That affects everything from car loans to mortgages, and it can hold you back from hitting bigger financial milestones.

Renting, Utilities & Insurance Approvals

It’s not just banks that check your credit. Landlords, utility companies, and even insurance providers may run credit checks. A poor history can mean higher deposits, stricter terms, or higher premiums.

Leaving Canada with Unpaid Debt

Moving abroad doesn’t give you a clean slate. Creditors may still try to collect, and unpaid balances can come back to haunt you if you return to Canada.

Alternatives to Doing Nothing: Start Smart, Pay Less

Debt Consolidation- Not a Cure-All

Debt consolidation combines multiple balances into one payment, ideally with a lower interest rate. It’s easier to manage, but it doesn’t reduce the total you owe. If the new payment is still too high, consolidation might not be enough.

Consumer Proposals- Lower Payments, Legal Protection

A consumer proposal, filed by a Licensed Insolvency Trustee, can really reduce your debt (up to 80%). It also stops interest, halts collection calls, and prevents lawsuits or wage garnishments. You’ll make one affordable monthly payment and can usually keep your assets. It’s one of the most effective ways Canadians deal with overwhelming debt.

Licensed Insolvency Trustee Support

Licensed Insolvency Trustees (LITs) are the only professionals in Canada who can file consumer proposals or bankruptcies. They’ll walk you through every option, explain what fits your situation, and guide you through

When Will Creditors Escalate Matters? A Timeline

From Late Notice to Collections

It usually starts with reminder letters or calls after the first missed payment. By 30–90 days, if payments still haven’t been made, creditors may assign or sell the account to a collection agency.

From Collections to Lawsuit

If the debt remains unpaid, a creditor may file a lawsuit. You’ll be notified and given the chance to respond. Ignoring this step can lead to a default judgment in the creditor’s favour.

Post-Judgment Actions: Seizing & Garnishing

Once there’s a judgment, creditors may garnish wages or freeze accounts (depending on provincial laws). This is where ignoring debt becomes most stressful—and why it’s better to act long before it gets here.

What You Should Do Instead: Take Back Control

Use Tools Like Debt-To-Income or Payment Calculators

Clarity is powerful. Farber’s Debt-to-Income Calculator gives you a quick picture of your situation, which makes decisions easier.

Talk to a Licensed Insolvency Trustee

Whether you’re considering consolidation, a consumer proposal, or bankruptcy, an LIT can explain every option and help you choose what’s right. Consultations are free, confidential, and judgment-free.

Keep Doing Something, Even Small Steps Count

You don’t have to fix everything at once. Even setting a budget, calling a creditor, or booking a consultation is progress. Every small step helps chip away at debt — and moves you closer to financial peace of mind.

Book a call today.