What Legal Actions Can Arise from a Defaulted Verbal Loan Agreement?

Question from Albert, What Legal Actions Can Arise from a Defaulted Verbal Loan Agreement?

Answer from AI:

When you resign from a job where you have an outstanding loan that was given to you by your employer, the terms of repayment can become a point of contention, especially if the agreement was verbal and not formalized in a written contract. However, in your case, there is a document that acknowledges the existence of a verbal agreement, and you have provided a signed affidavit promising to repay the loan. Here’s what you need to know about the potential legal actions that could arise from this situation:

Enforceability of Verbal Agreements

• Verbal agreements can be legally binding in Canada if they meet certain criteria, such as the intention to create legal relations and the presence of all the elements of a contract (offer, acceptance, consideration).
• The document stating the verbal agreement and your signed affidavit could serve as evidence of the loan’s terms and your commitment to repay.

Use of Property as Collateral

• Using property as collateral typically requires a security agreement and the property must be owned by you. If you do not own the property, it cannot legally be used as collateral.
• If the property was not legally yours to use as collateral, this aspect of the agreement may be unenforceable.

Potential Legal Actions for Non-Payment

• If you miss a payment, the lender (in this case, your former employer) may initiate legal action to recover the debt.
• This could include filing a claim in small claims court or a higher court, depending on the amount.
• The lender may also report the default to credit bureaus, which could affect your credit rating.

What You Can Do

1. Review the document and your affidavit to understand the terms you agreed to.
2. Communicate with your former employer to discuss possible repayment arrangements.
3. Consult with a legal professional for personalized advice, especially since the collateral involved is not your property.
4. Consider seeking assistance from a debt counselor or financial advisor to manage your repayment obligations.

Seeking Legal Advice

It is crucial to seek legal advice in this situation, as the complexities of your case, including the use of property you do not own as collateral, could have significant legal implications. A lawyer can help you understand your rights and obligations, negotiate with your former employer, and represent you in court if necessary.

Remember, each case is unique, and the above information is a general guideline. The actual legal actions that can be taken will depend on the specific details of your situation and the applicable laws in Canada.

For more information on the enforceability of verbal agreements and legal actions for debt recovery, you may refer to resources such as the Financial Consumer Agency of Canada.