What You Need to Know About 407 Debt

A multi-lane highway in Toronto, Ontario

Ontario’s 407 Highway can be a quick way to get around. Whether you use the 407 for personal use or business, it can be a speedy alternative to the congested 401 when you’re passing through the GTA. But it comes at a cost, and as it is the only toll road in Ontario, it can come as a surprise to drivers.

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Did You Get a Surprise 407 Bill?

407 bills are charged automatically. The highway charges per kilometre with adjustments for the type and weight of the vehicle. Unlike older models of toll roads, there is no toll booth or collection machine. Instead, electronic sensors record your entry and exit points. Later, a bill is sent to the address where the vehicle is registered.

It’s a technologically-advanced system compared to collection booths, but it can also mean getting a shockingly-high 407 bill in the mail. Exceptional 407 ETR bills often make the news, such as one home renovation business owner who received a bill for $28,000 related to his business.

Bills like these typically accumulate over a period of years. They may go unnoticed if they are sent to an old address, or some may choose not to pay them, either because they cannot afford to or they do not understand the consequences. Business owners may also find that they’ve been accumulated on commercial vehicles by an employee or partner without their knowledge.

With high Canadian household debts already common, an unexpected 407 ETR bill can make a tight financial situation even more difficult.

Collection Powers of the 407 ETR: Plate Denial and More

When accounts go unpaid, interest accumulates at a steep rate. The 407 ETR charges nearly 27% interest if you don’t pay on time. If the bill continues to go unpaid, there are collection actions the 407 ETR can take, one of which is unique among creditors in Ontario:

  • First, they will issue a notice of default and mail a demand for payment, as well as inform you of further actions that can be taken.
  • They may hire a collection agency, which can contact you with requests to collect your 407 payments on the company’s behalf.
  • They can also sue in order to get a judgement that allows them to garnish your wages.
  • Uniquely, the 407 ETR can also notify the Registrar of Motor Vehicles of your failure to pay, issuing a license plate denial. The Ministry of Transportation will not issue a vehicle permit when it comes time to renew your license plate.

People often discover the extent of their unpaid 407 bills when they go to renew their plate, only to find that they cannot.

How Long Does the 407 ETR Have to Pursue Legal Action?

Every creditor must sue in order to garnish a creditor’s wage or bank account, allowing them to collect directly from your employer or bank. However, creditors have a limited period of time and circumstances in which they can take this action.

The Statute of Limitations on debt collection in Ontario also called the limitation period, is two years from the last payment made by the debtor. In other words, if you do not make any payments on a particular debt for two years, the creditor can no longer take legal collection actions such as suing for wage garnishment.

Pursuing these actions can be expensive, so for smaller debts, the 407 ETR and other creditors are unlikely to attempt to garnish your wages. Refusing to pay your debt will have other consequences, though, such as a negative impact on your credit history and score.

It is important to realize that debt does not go away after the limitation period has expired. The debt becomes uncollectable if the debtor refuses to make payments, but it will still affect their credit score and may prevent them from qualifying for future credit.

If the debt is sold to a collection agency, they will likely contact you in an effort to reset the limitation period. If they successfully convince you to make a payment, the limitation period will reset, and they can then pursue more aggressive collection actions again.

Collection agencies should inform you of the source of the original debt. If it has been more than two years since your last payment, proceed with caution. Do not make a payment until you have decided how you are going to get out of debt. Be sure you can pay it all back if you make a payment. Otherwise, it may be time to consider other options, such as insolvency.

407 Debt Settlement

When someone winds up with an exceptionally high bill, the 407 ETR usually attempts to settle the debt rather than collect the full amount. They have a financial hardship program for customers who qualify and owe more than $1,000. The program allows customers to pay their amount owing in monthly payments over time without accruing further interest charges or actions such as wage garnishment.

To qualify, customers must apply and disclose information such as their income, expenses, and assets, as well as consent to a credit check. The payment plan can also still be steep. It requires a 30% down payment and may require amounts over $10,000 to be paid in 18 months. Not everyone may benefit from this program.

If you cannot afford the 407 ETR’s hardship program, it may be time to talk with Licensed Insolvency Trustees in Canada. You can schedule a free consultation with David Sklar & Associates to discuss your financial situation and the solutions available to you.

Can You Discharge 407 Debt?

The issue of whether or not 407 bills are unsecured debt and therefore dischargeable in a consumer proposal or bankruptcy was so contentious that it was taken all the way to the Supreme Court of Canada. Before the ruling, the 407 ETR relied on a section of Ontario’s Highway 407 Act to allow 407 toll charges to outlive their discharge from bankruptcy.

This meant that even people who filed for bankruptcy found that the province still refused to renew their license plates or issue a vehicle permit. A landmark Supreme Court ruling determined that the Bankruptcy and Insolvency Act took precedence over Ontario’s law about enforcing 407 bills, and 407 debts were unsecured.

The difference between unsecured and secured debts is that secured debts have collateral that can be collected if the debtor defaults on payments. For example, when you take out a mortgage, the bank can seize the house if you stop making payments. You would lose any equity that did not exceed the amount remaining on the loan.

Unsecured debts have no such collateral. They include credit card debt, payday loans, lines of credit, and other forms of credit. Creditors can pursue legal action against a borrower who stops paying to garnish their wages or bank accounts. However, they can be discharged in insolvency, providing relief to the borrower.

While there are other types of unsecured debts that can survive bankruptcy, such as student loans and family support arrears, 407 ETR bills are not specified as one of them in the Bankruptcy and Insolvency Act.

How to Get Debt Relief

When you discover you have 407 ETR debt on top of all the other debts you’re juggling, it can feel like you’re being pushed over the edge. It can spark a crisis if you’re already juggling high credit card balances, student loans, a line of credit, or tax debt.

Working with a Licensed Insolvency Trustee, you can explore your options for insolvency. Insolvency may involve either bankruptcy or a consumer proposal. Both of these processes allow you to repay just a fraction of your debt while the rest is discharged. A consumer proposal provides relief from interest rates and allows you to repay your unsecured debts in monthly installments. Bankruptcy may require you to give up assets to repay debts and may require additional monthly payments based on any surplus income, but any remaining debts will be discharged.

Insolvency will have an impact on your credit history and score, but it won’t last forever. If you cannot afford to repay what you owe, it’s an option that provides relief.

Insolvency is not your only option. You may also want to find out how debt settlement works in Canada, depending on the amount you owe or consider a debt consolidation loan.

Some different types of debt require different solutions. For example, student loans can only be included in bankruptcy under certain circumstances, while you may be able to pursue Canadian tax debt relief directly with the CRA or through insolvency.

A Licensed Insolvency Trustee will work with you to find the best solution for your situation. Only insolvency is legally binding for your creditors. If you pursue options other than insolvency, some creditors may be more cooperative than others.

Don’t let 407 ETR debt break your budget. Explore your debt relief options today.

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt and live in the Toronto area, call us at 416-498-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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