In Canada, if you cannot afford your rent-to-own furniture or appliance payments, you can voluntarily surrender the items back to the company. If returning the goods does not fully cover what you owe, the remaining balance becomes an unsecured debt, which can be completely legally discharged by filing a Consumer Proposal or personal bankruptcy.
Furnishing a new apartment or replacing a broken refrigerator can be an expensive endeavour. For Canadians with low credit scores or limited cash flow, rent-to-own companies and high-interest lenders (such as Easyfinancial or local appliance leasing stores) often seem like the only option. 🛋 Unfortunately, these contracts usually come with hidden fees and extremely high implied interest rates. Over time, the cost of a simple living room set can balloon into an unmanageable financial burden.
When unexpected life events occur—like a job loss in Calgary, a medical emergency in Montreal, or rising living costs in Halifax—keeping up with these high weekly or monthly payments can become impossible. It is vital to understand your rights under Canadian consumer protection and insolvency laws. A rent-to-own agreement is essentially a conditional sales contract or a secured lease. The company retains ownership or a security interest in the goods until you make the final payment. If you are drowning in debt, you have legal mechanisms to break the cycle, surrender the goods, and protect your future wages.
Step-by-Step Process for Surrendering Rent-to-Own Goods in Canada
Extricating yourself from a restrictive rent-to-own contract requires a clear understanding of the law and communication with the lender. If your overall debt situation is severe, combining the surrender of these goods with a formal debt relief programme is often the best strategy. 📝 Here are the typical steps to resolve rent-to-own debt.
Step 1: Reviewing the Lease Agreement
Gather your original contract from the rent-to-own company. You need to verify whether it is a true lease, a conditional sales agreement, or an unsecured loan used to purchase goods. Most traditional rent-to-own stores retain the title to the property until the term is complete. Under the Personal Property Security Act (PPSA) in your province, this means the goods are the collateral. You must check the contract for any specific clauses regarding voluntary surrender or cancellation fees.
Step 2: Voluntary Surrender of the Assets
If you can no longer afford the payments, you must contact the company and arrange to return the items. Do not simply hide the goods or sell them online; selling items you do not legally own is a serious offence in Canada. 🚚 You can ask the company to pick up the furniture or appliances, or you can drop them off at the store. Ensure you get a written receipt or a “Surrender Form” signed by the store manager proving that you returned the items in acceptable condition.
Step 3: Calculating the Shortfall (Deficiency Balance)
Returning the television or the sofa does not always mean you walk away scot-free. The company will assess the current used value of the returned items and subtract that from your total outstanding contract balance (including accumulated interest and fees). The difference is known as a “shortfall” or “deficiency balance.” Because the collateral (the furniture) is now gone, this remaining shortfall legally converts into a standard unsecured debt, much like an unpaid credit card.
Step 4: Filing for Debt Relief with a Trustee
If the rent-to-own company demands thousands of dollars for the shortfall and you have other debts like credit cards and payday loans, it is time to speak with a Licensed Insolvency Trustee. The LIT will help you file a Consumer Proposal or personal bankruptcy. Once filed, a federal “Stay of Proceedings” is issued. This legally stops the rent-to-own company from calling you, sending collection agencies after you, or garnishing your wages for the shortfall amount. The debt is then resolved through your insolvency proceeding.
Comparing Your Options: Keep vs Surrender
| Scenario | Action Required | Impact on Insolvency Filing |
|---|---|---|
| Keeping the Items | You must continue making the full contractual payments directly to the lender. | The secured debt is excluded from the insolvency. You keep the items as long as you pay. |
| Surrendering the Items | You return the goods to the store and obtain a surrender receipt. | Any shortfall balance becomes unsecured and is discharged by the Proposal or Bankruptcy. |
| Items Were Lost/Stolen | You must provide a police report to the lender explaining the loss. | The entire remaining balance becomes unsecured and can be fully included in your filing. |
How Much Does it Cost in Canada?
Getting out of a rent-to-own trap should not cost you exorbitant out-of-pocket fees if handled correctly. 💲 Here is what you need to know about the financial implications of surrendering goods and filing for relief:
- Return Fees: Check your contract. Some companies try to charge a “pick-up fee” or “restocking fee” (often $50 to $150 CAD). However, if you are filing for insolvency, you do not need to pay these fees upfront; they just get added to the unsecured claim.
- Shortfall Demands: The lender may send a bill claiming you owe $2,000 CAD for the deficiency. Again, if you are filing a Consumer Proposal, you do not pay this directly to them.
- LIT Costs: Consultations with a Licensed Insolvency Trustee are free across Canada. If you file a Consumer Proposal, the LIT’s federally regulated fees are taken from your single monthly payment. You do not write a separate cheque to the Trustee.
How Long Does the Process Take?
Dealing with aggressive rent-to-own collection departments can be stressful, but the legal remedies are relatively swift. ⏱ Understanding the timeline can provide significant peace of mind.
- Surrendering Goods: This can be done immediately. Once you schedule a pick-up or drop off the items, the physical burden is resolved in a matter of days.
- Stopping Collections: If the company is harassing you for a shortfall, filing a Consumer Proposal or bankruptcy stops the calls instantly. The Stay of Proceedings is legally binding the moment your LIT files your paperwork with the federal government.
- Resolving the Debt: A standard bankruptcy takes 9 to 21 months to reach a full discharge. A Consumer Proposal is a payment plan that can last up to 5 years (60 months), though it can be paid off early at any time.
Frequently Asked Questions (FAQ)
Can a rent-to-own company send me to jail for not paying?
Absolutely not. We do not have debtor’s prisons in Canada. Failing to pay a civil contract is not a criminal offence. The lender’s only recourse is to repossess the items, send the debt to collections, or sue you in civil court.
Can I sell the rent-to-own furniture to pay off the debt?
No. You do not legally own the furniture or appliances until the final payment is made. Selling collateral that belongs to a secured creditor is illegal and could potentially lead to serious legal consequences or claims of fraud.
What happens if I file a Consumer Proposal but want to keep the TV?
If you wish to keep the item, you must continue making your regular payments to the rent-to-own company outside of your Consumer Proposal. Secured lenders are within their rights to repossess the goods if you default on the specific contract, regardless of your proposal.
Will returning the items fix my credit score?
Simply returning the items stops the bleeding, but it does not instantly fix your credit. The lender will likely report the broken contract and any unpaid shortfall to the credit bureaus (Equifax and TransUnion), which will negatively impact your credit rating.
Leave a Reply