Difference between pages "Creditors' Remedies against Debtors (10:III)" and "Introduction to Debtors' Options (10:IV)"

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{{LSLAP Manual TOC|expanded = creditors}}
{{LSLAP Manual TOC|expanded = creditors}}


Before taking action against a debtor, a creditor must provide a reasonable time for payment on a demand loan or term loan. That time begins to run from the date of the demand for payment and not the date of the loan.  What constitutes a reasonable demand period depends upon the facts of each case. For a list of factors to be considered see [https://www.canlii.org/en/ca/scc/doc/1999/1999canlii714/1999canlii714.html ''Royal Bank of Canada v. W. Got Associates Electric Ltd.'', [1999<nowiki>]</nowiki> 3 SCR 408, 1999 CanLII 714 (SCC), para. 18)].
Being in debt is obviously stressful for debtors. Debtors should be made aware that measures can be taken against overeager creditors. Although creditors may choose to not initiate legal action, a '''debtor should not assume that they can ignore their responsibilities.''' The debtor may try to communicate with the creditor(s) in hopes of reaching an agreement about repayment, and to avoid potentially costly legal battles. However, this is only to be done when the debtor wishes to acknowledge the debt.
Under the current Limitation Act, in British Columbia the period for when a proceeding for the collection of a debt must be commencted is 2 years from the “date of discovery” of the claim.  The date of discovery is defined as the day on which the claimant knew or ought reasonably to have known all of the following:
*a) that injury, loss or damage had occurred;       
*b) that the injury, loss or damage was caused by or contributed to by an act or omission;       
*c) that the act or omission was that of the person against whom the claim is or may be made;       
*d) that, having regard to the nature of the injury, loss or damage, a court proceeding would be an appropriate means to seek to remedy the injury, loss or damage.


Under the ''Limitation Act'', SBC 2012 c. 13. a creditor generally cannot succeed in pursuing a debtor after two years from the last payment or acknowledgement of the debt. Communications with creditors that acknowledge the debt will initiate a new two year time horizon in which a creditor is able to pursue the debtor. To avoid acknowledging a debt, it is important that the following phrase be included in the letter: “This communication is provided solely for the purpose of [state purpose of letter] and does not constitute an acknowledgement of the alleged debt described (above).” This should be carefully considered when a debtor is approaching the end of a two year timeline in which they will be relinquished of legal responsibility for the debt at issue. Since this change to the limitation period, several major creditors  have been pursuing debtors through in house collections more aggressively, rather than sending the accounts to third party agencies. The limitation change may also be leading creditors to pursue debtors in court with greater frequency.


:'''NOTE:''' The limitation period does not apply to court proceedings and claims exempted under sections 2 or 3.   
If an acknowledgement of the debt occurs, both the debtor and the creditor must be realistic about the situation. Both parties must assess the costs and delay involved in any litigation. In such negotiations, the latter factors may work in favour of the debtor.   


== A. Secured Creditors ==
A debtor may wish to seek legal advice before discussing or disputing a debt with a creditor, but this is not always necessary. If the debtor believes they do not owe the debt they should consider legal advice. If the debtor believes they owe the money but disputes the amount claimed, they may also want to consider legal advice. However, if the debtor simply cannot meet the payment terms, it is recommended that they seek credit counselling. See [[Dealing with Debt (10:IV) | Section IV. Dealing With Debt]].


=== 1. Definition ===
Where a creditor is pressuring a debtor for payment, a debtor may send a “without prejudice” letter to the creditor explaining their position and/or offering a settlement. See [[{{PAGENAME}}#F. Settlements | Section III.F: Settlements]], below for further information. When writing a Without Prejudice letter it is critical to include the following phrase: “This communication is provided solely for the purpose of [state purpose of letter] and does not constitute an acknowledgement of the alleged debt described above.”


A secured creditor holds a lien, mortgage, or charge against the debtor’s assets or collateral as security for the repayment of the debt.  
A debtor cannot seek to avoid defending an action in court where that action takes place in another province on the grounds that the court lacks jurisdiction. An action under s 29 of the ''COEA'' to enforce an extra-provincial default judgment may proceed where the debtor was  served but chose not to offer any defence to the original statement of claim. The creditor simply registers a judgment from another province in B.C., and it becomes a B.C. judgment. Furthermore, as a result of the decisions in ''[https://www.canlii.org/en/ca/scc/doc/1990/1990canlii29/1990canlii29.html?autocompleteStr=Morguard%20Investments%20v%20De%20Savoye%2C%20%5B1990%5D%203%20SCR%201077&autocompletePos=1 Morguard Investments v De Savoye'', [1990<nowiki>]</nowiki> 3 SCR 1077] and ''[https://www.canlii.org/en/ca/scc/doc/2003/2003scc72/2003scc72.html?autocompleteStr=Beals%20v%20Saldanha%2C%20%5B2003%5D%203%20SCR%20416%2C%202003%20SCC%2072&autocompletePos=1 Beals v Saldanha'', [2003<nowiki>]</nowiki> 3 SCR 416, 2003 SCC 72], American and other international default judgments can also be enforced in B.C.  


=== 2. General Introduction to the PPSA ===
The process for enforcing a foreign judgment is simplified where the judgment originates from one of  the reciprocating states listed in the COEA: http://www.bclaws.ca/civix/document/id/loo95/loo95/courtorderenflist. Judgments from one of the foregoing reciprocating states can simply be registered in the B.C.S.C.


The ''Personal Property Security Act'' [PPSA] establishes a system for the registration, priority, and enforcement of secured loan and credit transactions involving personal property in B.C.  Secured creditors holding agreements that create or provide for security interests (i.e. chattel mortgages and conditional sales agreements) must register these security agreements in order to “perfect” its interest and establish its priority in regards to third parties. See “Perfection” on page 3.
If the judgement does not originate from a reciprocating state, a creditor must bring an action on the judgment or on the original cause of action instead. This process requires a trial on the judgment or original action, where the court will determine whether to enforce the foreign judgment.


For agreements that are subject to the PPSA, Part 5 of the PPSA outlines the creditor’s remedies (ss 56 - Rights and remedies, 57 - Collection of payments under intangibles or chattel paper, 58 – Right of seizure or repossession, and 67 - Rights and remedies: consumer goods).  For agreements that involve fixtures, crops or accessions, ss 36 – 38 apply. In addition, Part 6 contains some sections (i.e. ss 68(2) - Good faith and commercially reasonable, and 72 - Notice) that are of procedural importance.
:'''NOTE:''' There have been judgments for the creditor where the creditor pursues the debtor after the two-year timeline.  This may happen where the creditor is inexperienced or neglectful, the debtor does not defend themselves, or the period between payments is not reviewed. If the judgment has been issued by the court, it may be more cost-effective to try and settle the matter with the creditor instead of challenging it in court.


:'''NOTE:''' ''PPSA'' issues, particularly those involving priority disputes or matters relating to the transitional provisions, are complex and may have to be referred to a lawyer.
== A. Legal Advice for Debtors Under Secured Transactions ==


=== 3. What Does the PPSA  Govern? ===
The information in this section is specific to the defendant’s point of view, but is most usefully read in conjunction with [[Creditors%27 Remedies against Debtors (10:II) | Section II: Creditors’ Remedies]]. If a student needs more information, that section may help to complete the picture.


The scope of the ''PPSA'' is defined in s 2 as including every transaction that in substance creates a security interest without regard to its form. As well, under s 3, a transaction involving either a transfer of an account or chattel paper, a commercial consignment, or a lease for a term of more than one year that  does not secure payment or performance of an obligation (i.e. does not create a security interest) is subject to the ''PPSA''. '''Section 55 provides that Part 5 does not apply to transactions brought within the ''PPSA'' by s 3. It is necessary to look to the terms and the common law.''' 
Where the debtor is in default under a security agreement, s 56 of the PPSA provides that the secured party has against the debtor the rights and remedies provided in the security agreement (provided such do not derogate those rights given to the debtor by the PPSA) as well as those specifically provided by the Act.  


:'''NOTE:''' Section 4 lists types of transactions that are exempt from the ''PPSA''. The ''PPSA'' does not apply to a “lien, charge or other interest given by a rule of law or an enactment unless the enactment contains an express provision that the ''PPSA'' applies”. Generally this excludes real property and natural resources.  
Sections 58 and 59, contain rules for seizing and disposing of collateral. These sections provide that, unless the security agreement states otherwise, where the debtor defaults on their payment, the creditor may elect to take possession of the collateral pursuant to the contract, dispose of the collateral and then sue for any amount still owing. Section 67, provides for a more limited set of remedies where the collateral  takes the form of consumer goods – known as the “seize or sue” rule. Formerly, under legislation repealed by the PPSA, all creditors could only seize or sue but not both. The principle of “seize or sue” still applies to “consumer goods” (see [[Creditors%27 Remedies against Debtors (10:II)#6. Seizure | Section II.A.6.: Seizure]] and [[Creditors%27 Remedies against Debtors (10:II)#7. Disposal of Collateral | Section II.A.7: Disposal of Collateral]]); it no longer applies to commercial goods. The PPSA defines “consumer goods” as those goods that are used or acquired  for use primarily for personal, family or household purposes. “Commercial goods” are those goods used for commercial purposes.  


==== a) Perfection ====
=== 1. Notice ===


For a creditor’s interest in a good to be practically effective,  s 35(1)(b) of the ''PPSA'' states that the interest must be “perfected”, whereby the  creditor becomes a “secured” party. By virtue of s 19, a security interest must satisfy two conditions to be “perfected”:
Subject to the circumstances where notice is not required as per s 59 (17) (i.e. for perishable collateral, collateral requiring disproportionately high storage costs relative to its value, etc.), the requirements for notice are outlined in ss 59(6) and (10): the secured party or receiver, as the case may be, must provide at least 20 days’ notice of an intention to dispose of the collateral to parties including the debtor and any other creditor. The clinician should check to make sure that the debtor received notice in time and in the correct form. See [[Creditors%27 Remedies against Debtors (10:II)#8. Notice to Dispose of Collateral | Section II.A.8: Notice to Dispose of Collateral]] for a complete account of the notice requirements that must be met under the PPSA.
*i) the security interest must have “attached” (see below); and  
*ii) the secured party must ensure that “all steps required for perfection under this Act have been completed” (see below).  


In general, attachment will ensure that the security interest is enforceable against the debtor, while perfection will protect the security interest against  competing third party claims.  
:'''NOTE:''' The forms of notices under the PPSA depend on a number of variables, including the nature of the security and the terms of the security agreement. Creditors or debtors seeking advice concerning the validity of notices should be referred to a lawyer.  


“Attachment”: Section 12 states that a security interest attaches to the good when:
=== 2. Limitation of the Right of Seizure ===
*i) value is given;
*ii) the debtor has rights in the collateral; and
*iii) except for the purpose of enforcing rights between the parties to the security agreement, the security interest becomes enforceable under s 10 (unless  the parties specifically agreed to postpone the time for attachment in which case the security interest will attach at the time specified in the agreement).


=== 4. Methods of Perfection ===
With respect to collateral which is a “consumer good,” where the debtor has paid at least two-thirds of the total amount secured, the creditor may not seize the good without first obtaining a court order.  


*i) '''perfection by possession of collateral applies to all forms of security interests (s 24)''';
=== 3. Rights of a Debtor on Realization ===


*ii) '''perfection by registration'''. Subject to s 19, registration of a financing statement in the Personal Property Registry perfects a security interest in collateral. (s 25); and
The PPSA preserves the debtor’s (but not the secured party’s) rights and remedies under other statutes that are not inconsistent with the  ''PPSA'', as well as the specific rights and remedies provided in the security agreement, ss 17, 17.1 and 56(2)(b).


*iii) '''temporary perfection''' (See ss 5(3), 7(3), 26, 28(3), 29(4) and 51).
=== 4. Rights of Redemption and Reinstatement ===


=== 5. Remedies ===
Under s 62, a debtor has redemption rights. Any person entitled to notice of a pending disposition of collateral may “redeem” the collateral  by tendering to the secured party fulfilment of the obligations secured by the collateral plus the reasonable expenses incurred by the secured  party associated in seizing the collateral or otherwise preparing it for disposition. The aforementioned obligations may simply be the amount in arrears; however, it is more often the case that an acceleration clause applies, and that the obligations will be the total amount of the debt. Where the security agreement contains an acceleration clause, the debtor may apply to court for relief from the consequences of default  or for an order staying enforcement of the security agreement’s acceleration provision. 


Where a debtor defaults on a security agreement, s 56 provides that the only rights and remedies the secured party has against the debtor are those provided in the security agreement (as long as they do not derogate those rights given to the debtor by the ''PPSA''), and those specifically provided by the ''PPSA'' (s 17 and ss 36 – 38).
Where the collateral is a “consumer good”, the calculation of the obligation secured and the obligation that must be tendered is varied. The  debtor may “reinstate” the security agreement by paying only the monies actually in arrears – negating the operation of any acceleration  clause. The debtor may waive this right but any such agreement must be in writing after default. Note that the number of times the debtor may  reinstate the security agreement is limited depending on the period of time for repayment set out in the security agreement; however, the  frequency of reinstatement may be varied by agreement between the parties.


Important sections of the ''PPSA'' for the creditor are ss 58 and 59, which contain rules for seizing and disposing of collateral. These sections provide that,  unless the security agreement states otherwise, where the debtor defaults on their payment, the creditor may elect to take possession of the collateral pursuant to the contract, dispose of the collateral and then sue for any amount still owing. Section 67, provides for a more limited set of remedies where the collateral takes the form of consumer goods – known as the “seize or sue” rule. Formerly, under legislation repealed by the ''PPSA'', all creditors could only seize or sue but not both. '''The principle of “seize or sue” still applies to “consumer goods” (see [[{{PAGENAME}}#6. Seizure | Section II.A.6: Seizure]], below); it no longer applies to commercial goods'''.
=== 5. Execution ===


=== 6. Seizure ===
See [[Creditors%27 Remedies against Debtors (10:II)#2. Execution | Section II.B.2: Execution]].


Where the security interest does not involve fixtures, accessions, crops, or consumer goods, s 58 provides the fundamental rule for realization upon non-possessory security interest in tangible personal property: '''the secured party has a right to seize (in the case of a secured loan transaction) or to repossess (in the case of a secured credit sales transaction) the collateral'''. Upon seizing the collateral, s 17 defines the rights and obligations of secured parties in possession of collateral. The section imposes a standard of reasonable care on the secured party in possession of the collateral and the secured party must  follow the notice provisions outlined in ss 59(6) – (12) before they are entitled to carry through with disposal.
== B. Legal Advice for Debtors Who are Garnished ==


=== 7. Disposal of Collateral ===
The details of how an order for garnishment is obtained are found in the creditor’s remedy portion of the chapter, but debtors should be  reminded that hardship may be a defence to garnishment. Therefore, a pre or post-judgment garnishment order may be varied where it would be  unfair to the judgment debtor; it is generally easier to have a pre-judgment order varied.  


After seizing collateral, the secured party under s 59(2) may dispose of it either in its present condition or after repairing it (though s 68(2) protects the debtor from incurring unnecessary expenses because all rights, etc., under the ''PPSA'' must be discharged “in good faith”). Further, s 59(3) provides that the secured party may dispose of the collateral by a private or public sale (either as a whole or in commercial units or parts) and, if the security agreement so provides, by lease. See also [[{{PAGENAME}}#10. Voluntary Foreclosure | Section II.A.10: Voluntary Foreclosure]].
Under ss 3 or 4 of the ''COEA'', a judge has the discretion to set aside a garnishing order once the debtor has made an application. A judge will consider:  


Section 59(2) provides a priority scheme regarding application of the proceeds of sale:  
'''For pre-judgment orders only:'''
*first, toward the reasonable expenses of seizing, repairing, etc.;
*second, toward the satisfaction of the obligations owed to the secured party; and
*last, if any surplus exists, to the  satisfaction of obligations owed to persons holding a subordinate security interest, and then toward the debtor (s 60).


A person who buys an item from a disposal sale takes the good free and clear of the interests of a debtor, the secured party, and any subordinate creditors whether or not the secured party complied with the requirements of the section.  In the case of a prior secured creditor’s interest, if the goods are “consumer goods” of a value less than $1,5000 (and not fixtures) and the purchaser gave value for the goods, the purchaser takes them free of the prior secured creditor’s interest (see s 59(14)).
#the strengths and weaknesses of the defendant’s defence to the claim.  


=== 8. Notice of Intention to Dispose of Collateral ===
'''For both pre and post-judgment orders:'''


:'''NOTE:''' The forms of notices under the ''PPSA'' depend on a number of factors, including the nature of the security and the terms of the security agreement. Advice concerning the validity of notices should be referred to a lawyer.
#whether the judgment leaves the debtor with an inordinately low cash flow;
#whether there is a risk that the grant or continuance of the order will cause an injustice to the debtor;
#whether there is a possibility of abuse of process by the creditor; and
#whether the garnishment of certain payments, such as social assistance benefits, run counter to public policy


Subject to the circumstances where notice is not required as per s 59(17) (e.g. for perishable collateral, collateral requiring disproportionately high storage costs relative to its value, etc.), the requirements for notice are outlined in ss 59(6) and (10). These sections require that the secured party, or receiver, as the case may be, must provide at least '''20 days’''' notice of their intention to dispose of the collateral to parties including the debtor and any other creditor.  
Furthermore, ss 3(5) and 4(4) of the ''COEA'' describes the limits to which a debtor’s wages may be garnished. Thus, if a debtor has a low income or has savings they depend on for the necessities of life, they can have the amount that is being garnished (or proposed to be garnished) reduced, the terms of the order varied, or the garnishment ended. A person who is subject to a Notice of Attachment under the Family Maintenance Enforcement Program can also try to have the amount that is being ‘garnished’ reduced. Additionally, a garnishing order from a civil action has to be renewed monthly, while a garnishing orderfor maintenance does not.


'''When a secured party is considering methods of disposal, they must give notice to the following parties (see s 59(6)):'''
If the debtor receives income from a statutory benefit that is exempt from garnishment (e.g social assistance or COVID-19 benefits), they should be advised as to how to protect their money after it is paid to them. '''The right of offset allows banks to seize deposited funds from an account at that  institution to cover a loan or account in default. If funds which are exempt from garnishment are deposited into a regular account that is commingled with other funds, they will not be protected from seizure by the financial institution. Their income should be safe if it is paid by  direct deposit into an account at an institution to which they do not owe any money.''' No other deposits should ever be made into this account.  It is also helpful to speak to a branch manager so that they understand the purpose of the account. '''A debtor should be advised that they have  a right to open a personal bank account at a chartered bank, even if they do not have a job or do not have money to put in the account right away.''' However, the applicant can be refused if the bank employee suspects fraud or experiences harassment from the applicant. For further  information, see: http://www.fcac-acfc.gc.ca and navigate through the website by clicking on Consumers > Resources > Publications > Banking > Opening a personal banking account: understanding your rights.
*i) the debtor;
*ii) any other person who is known by the secured party as the owner of the collateral (where that is not the debtor);
*iii) any creditor or person with a security interest in the collateral whose interest is subordinate to the secured party, who registered a financing statement, or whose security interest is perfected by possession at the time of seizure or repossession of the collateral; and
*iv) any other person with an interest in the collateral who has given notice to the secured party of their interest in the collateral before the notice of disposition is given to the debtor.  


'''The secured party is required to include specific information in the notice (see s 59(7)):'''
:'''NOTE:''' This right to open a personal account does not extend to credit unions. Credit unions are regulated under provincial legislation rather than the federal act and they have wider powers to deny applicants. For further information, visit http://www.fic.gov.bc.ca.
*i) a description of the collateral;
*ii) the amount required to satisfy the obligation secured by the security interest;
*iii) the arrears owing (exclusive of the operation of an acceleration clause);
*iv) the expenses associated with seizure and repossession; and
*v) the date, time and place of disposition.  


'''In the case of a receiver attending to the disposition of the collateral, the receiver must give notice to (see s 59(10)):'''
== C. Harassment by Debt Collectors ==
*i) the debtor;
*ii) any other person known by the secured party to be an owner of the collateral;
*iii) any creditor with a security interest subordinate to that other secured party, who has either registered the financing statement, or who  has perfected its security interest by possession at the time of the seizure or repossession of the collateral; and
*iv) any other person with an interest in the collateral who has notified the receiver of that interest in the collateral before the notice of disposition is given to the debtor.


'''The notice that the receiver must provide need contain only (see s 59(11)):'''
The ''Business Practices and Consumer Protection Act'', SBC 2004, ch 2 [''BPCPA''] provides for the licensing and regulation of debt collectors, which is carried out by Consumer Protection BC. The statute provides that jurisdiction is determined by the location of the debtor. Under the statute, Consumer Protection BC has wide powers of investigation.
*i) a description of the collateral;
*ii) a statement that unless the collateral is redeemed it will be disposed of; and
*iii) the particulars relating to the place of disposition or where tenders may be delivered.  


=== 9. Surplus or Deficiency ===
=== 1. Unreasonable Collection Practices ===


When a secured party is left with a surplus after disposal of the collateral, it must be accounted for and paid to the parties in the order specified in s 60(2). If a dispute regarding entitlement arises, s 60(4) provides for the secured party to pay the secured funds into court, which gives those claiming entitlement the opportunity to make an application under s 70 for payment.
A collector must not communicate with a debtor, a member of the debtor’s family, a relative, a neighbour or the debtor’s employer in a manner  or with a frequency as to constitute harassment. The following constitutes harassment:
*a) using threatening, profane, intimidating or coercive language;
*b) exerting undue, excessive or unreasonable pressure; and/or
*c) publishing or threatening to publish a debtor's failure to pay (''BPCPA'', s.114).  


Under s 60(5), the debtor is responsible for any deficiency balance unless the secured party and the debtor have agreed otherwise and made provisionsas such in the security agreement.
A collector cannot communicate with a debtor at the debtor’s place of employment unless one of the following conditions is met:


:'''NOTE:''' This section does not apply to consumer goods.  
*a) the collector does not have the home address or telephone number for the debtor and the collector contacts the debtor solely for the purpose of requesting the debtor's home address or telephone number or both;
*b) the collector has attempted to contact the debtor at the debtor’s home address or telephone number, but the collector has not contacted the  debtor in any of these attempts (the collector is limited to one verbal attempt at the debtor’s place of employment (s 116(2)), meaning one  call even if the debtor doesn’t answer or hangs up); or
*c) the collector has been authorized by the debtor to communicate with the debtor at the debtor’s place of employment (s 116 (1)).  


=== 10. Voluntary Foreclosure ===
When the collector is contacting the debtor, they must indicate the name of the creditor with whom the debt was incurred, the amount of the  debt, and the identity and authority of the collector to collect the debt from the debtor (s 116 (3)).  


After default, a secured party may make a proposal to the debtor and other interested parties to take the collateral to satisfy obligations secured by it (s 61).
The collector must only contact a debtor through writing if the debtor provides a mailing address and notifies the collector in writing that they wish to be contacted only by writing. (s 116 (4)). Be aware that ignoring written communications could result in a collector starting legal proceedings, notice of which would be sent via writing, so a debtor should always be reading the communications and carefully considering if and how they should respond.


'''The debtor and other interested parties have 15 days to object to the secured party’s proposal. Failure to object is deemed to be an irrevocable election to forfeit all rights and interests in the good and entitles the secured party to retain the good.'''
In collecting or attempting to collect payment of debt, a collector must not supply any false or misleading information; misrepresent the purpose of communication; misrepresent the identity of the collector or, if different, the creditor; or use, without lawful authority, a  summons, notice, demand, or other document that suggest or implies a connection with any court inside Canada (s.123).  


If the debtor or other secured party provides notice of objection to the secured party within 15 days after the notice is given, the secured party must dispose of the collateral in accordance with the provisions of s 59 (s 61(2)).  In such circumstances, under s 61(7), the secured party may make an application to the court for an order that an objection to the secured party’s proposal is ineffective because:
If a creditor does not obey the ''BPCPA'', the debtor may report the creditor to [http://www.consumerprotectionbc.ca Consumer Protection BC].  
*i) the objection was made for a purpose other than protecting an interest in the collateral or the proceeds of the disposition of the collateral; or
*ii) the market value of the collateral is less than the total amount owing to the secured party plus the costs of disposition.  


=== 11. Restrictions on Realization ===
=== 2. Limits on Right of Seizure ===


==== a) Subordination of Unperfected Security Interests ====
Under s 122, no collector, whether on their own behalf or on behalf of another, directly, indirectly, or through others, shall:
*a) unless there is a court order to the contrary, remove from the debtor’s private dwelling any personal property claimed under seizure, distress, or repossession, in the absence of the debtor, the debtor’s spouse, the debtor’s agent, or an adult resident in the debtor’s dwelling;
*b) seize, repossess or levy distress against any chattel not specifically charged or mortgaged, or to which legal claim may not be made under a statute, court judgment, or court order; or
*c) remove, seize, repossess, or levy distress against any chattel during a day or during the hours of a day when such removal, seizure,  repossession or distress is prohibited by regulations under this Act.


Under s 20(a), an unperfected security interest is subordinate to the interest of:
=== 3. Consequences of Contravention of the Business Practices and Consumer Protection Act ===
*a person who causes the collateral to be seized under legal process to enforce a judgment (including execution, garnishment or attachment), or who has obtained a charging order or equitable execution affecting or relating to the collateral;
*a representative of a creditor enforcing the rights of a person referred to above; and 
*a sheriff acting under the Creditor Assistance Act and any judgment creditor entitled to participate in the distribution of property under the ''Creditor Assistance Act''.


Also, if an interest is unperfected at the date of the bankruptcy or winding-up, then that interest is not effective against a trustee in bankruptcy or a liquidator (''Winding-up and Restructuring Act'', RSC 1985, c 6).
Where there is evidence of misconduct by the debt collector, the Director may suspend, cancel, or refuse to issue their licence (s 146(1)). Such conduct includes (s 146(2)):
*a) contravening this Act or regulations;
*b) failing to meet the minimum requirements for a licence;
*c) contravening a condition of a license;
*d) engaging in a pattern of conduct by the debt collector that shows that they are unfit to have a licence; or
*e) being convicted of an offence under Canadian law for conduct that shows they are unfit to have a licence.


In addition, ss 20(c), 30(3) and 31 confirm the subordination of the interest of a secured party to a bona fide purchaser for value under various circumstances.
=== 4. Legal Advice for a Harassed Debtor ===


==== b) Restriction on the Right to Accelerate a Term Debt ====
If there may be a violation of the ''Business Practices and Consumer Protection Act'', the debtor should do the following:
*a) find out the name of the collector and/or agency;
*b) record the exact words or practice followed by the debt collector or the agency; and
*c) detail the time and dates of the calls or visits.


The security agreement may contain an “acceleration clause” that provides that the total amount owing becomes due upon default in payments or on other grounds, such as whenever the secured party has “commercially reasonable grounds” to believe that they may not be repaid or that the collateral is “in jeopardy”.  If there is an acceleration clause in the security agreement, other than in the case of default of payments, the acceleration clause may not be invoked unless this objective test of “commercially reasonable grounds” has been satisfied.  A secured creditor has commercially reasonable grounds when they have a reasonable belief that there is a risk of non-payment. This could occur for a variety of reasons including the debtor fleeing the country, being hospitalized or illegal activity taking place on the premises. If the risk is not obvious the creditor must make commercially reasonable efforts to verify their suspicions. Commercially reasonable efforts do not mean best efforts.
With the above information the debtor should contact Consumer Protection BC for the name of the complaints manager for the collection agency the debtor is dealing with. This complaints manager will work with the debtor to resolve the complaint, including disciplinary action, if appropriate. Their website is http://www.consumerprotectionbc.ca and includes resources regarding consumer and debtor rights, as well as dispute resolution. It also includes a form for registering a complaint with Consumer Protection BC.  


==== c) Limitation of the Right of Seizure for Consumer Goods ====
Finally, if the debtor suffered damages or inconvenience as a result of the agency’s collection practices, a Small Claims action may be commenced (s 171, 172).


For collateral that is a “consumer good”, where the debtor has paid at least two-thirds of the total amount secured, the creditor may not  seize the good without first obtaining a court order (see [[{{PAGENAME}}#a) Secured Party's Remedies | Section II.A.12.a: Secured Party's Remedies]]).
== D. Credit Reporting Agencies ==


==== d) Obligation While in Possession of Collateral ====
Businesses offering goods or services on credit often rely on credit bureau reports for financial and prior debt information on their customers. See ''Business Practices and Consumer Protection Act, ss'' 106-112.


Section 17 of the ''PPSA'' imposes a standard of reasonable care on any secured party in possession of the collateral.  
The ''Business Practices and Consumer Protection Act'' regulates the activities of the credit bureaus in order to minimize unfair treatment of the party seeking credit. Federal legislation, such as the ''Personal Information Protection and Electronic Documents Act'', SC 2000, c 5 [''PIPEDA''] and  the ''Privacy Act'', RSC 1985, c P-21 also outline the requirements for organizations in their use, collection, and disclosure of personal information in their business practices. Credit information that these bureaus can disclose is the most common type of personal information, and includes one’s:
*a) name, date of birth and address;
*b) current and former marital status;
*c) current and former place of work;
*d) payment habits; and
*e) debts owing.  


==== e) Rights of a Debtor ====
'''A credit reporting agency cannot give out an individual’s personal credit report without that individual’s consent.''' When one seeks credit, they will be asked to consent to the lender obtaining a credit report or a credit check. (After consent is given, the lender can  obtain a “soft check” periodically meaning they can view the report relating to their loans).   


The ''PPSA'' preserves the debtor’s (but not the secured party’s) rights and remedies under other statutes that are not inconsistent with the  PPSA as well as the specific rights and remedies provided in the security agreement, ss 17 and 56(2)(b).  
Certain information cannot be included in a credit report, e.g., criminal charges (unless the individual was convicted), convictions more than six years old, and information about race, religion or political affiliation (BPCPA, s 109(1)).


==== f) Rights of Redemption and Reinstatement ====
Credit reporting agencies’ records are not always accurate and up to date. The quality and accuracy of the credit information depends on the credit information provided by the credit-granting companies who sign up with the credit reporting agencies. If an individual finds incorrect information on their file, they can report the error to the agency that provided the information to have it corrected. If an individual has proof that their credit report contains an error and they are unable to resolve it with the creditor directly, the individual should contact the credit reporting agencies who are reporting the incorrect information.


Under s 62, a debtor has redemption rights.  Any person entitled to notice of a pending disposition of collateral may “redeem” the collateral by tendering to the secured party fulfilment of the obligations secured by the collateral plus the reasonable expenses incurred by the secured party associated in seizing the collateral or otherwise preparing it for disposition. The aforementioned obligations may simply be the amount in arrears; however, it is more often the case that an acceleration clause applies, and that the obligations will be the total amount of the debt. Where the security agreement contains an acceleration clause, the debtor may apply to court for relief from the consequences of default or for an order staying enforcement of the security agreement’s acceleration provision.  
The agencies will assist them in finding a resolution. '''Any individual who is a victim of identity theft should immediately file a police report'''. The ''BPCPA'' allows individuals to provide a 100 word explanation to the reporting agency, which is to be kept and reported with their file (s.111); this may be a useful provision if a business has reported a disputed claim regarding yourself, or if you are a victim of identity theft. Any victim of identity theft is recommended to  post a comment on their credit report. This notifies creditors of the fact that the identity theft has taken place, and prevents additional credit being granted without a thorough review by the creditor. It is an offence (punishable by a fine of up to $10,000 or imprisonment for up to 12 months) to knowingly supply false or misleading information to a reporting agency (s 112).  


===12. Consumer Goods ===
Consumers may obtain their own credit report for free at least once a year by telephoning the credit bureaus directly or completing the form available on their websites Alternatively, a consumer can obtain an instant credit report by using a credit card to pay a one time fee.  


Where the collateral is a “consumer good”, the calculation of the obligation secured and the obligation that must be tendered is varied.  The debtor may “reinstate” the security agreement by paying only the monies actually in arrears – negating the operation of any acceleration clause.  The debtor may waive this right, but any such agreement must be in writing after default.  Note that the number of times the debtor may reinstate the security agreement is limited depending on the period of time for repayment set out in the security agreement; however, the frequency of reinstatement may be varied by agreement between the parties.  
There are currently two main credit reporting agencies in Canada, listed below.  


==== a) Secured Party’s Remedies ====
'''Equifax'''


Section 67(1) lists the options available to a secured party. '''The secured party may elect to pursue one of the following remedies:'''
Toll-free: 1-800-465-7166
*seize or repossess the goods (s 58); 
*enact the voluntary foreclosure remedy (s 61) (discussed above);
*accept the surrender of the goods by the debtor; or
*start an action to recover a judgment against the debtor for the amount of the unpaid debt or unperformed obligations under the security agreement.


This is sometimes called the “seize or sue” rule.  
Website: http://www.equifax.ca


If the debtor has paid at least two-thirds of the total amount of the secured obligation, the secured party may not seize the consumer good  used as collateral (s 58(3)). However, the secured party may apply to court for an order that the “two-thirds rule” should not apply and the court will make a decision based on (s 58(4), (5)): 
'''TransUnion'''
*the value of the collateral;
*the amount of the obligation that has been discharged;
*the reasons for default; and
*the current and future financial circumstances of the parties. 


==== b) Disqualification from “Seize or Sue” and Leases ====
Toll-free: 1-800-663-9980 (English); 1-877-713-3393 (French)  


A secured party with a security interest in “consumer goods” may escape the seize or sue provisions where:  
Website: http://www.transunion.ca
*the debtor has engaged in wilful or reckless acts or neglect that has caused substantial damage or deterioration to the goods; the secured party may seek a court order pursuant to s 67(8) disqualifying the debtor from the rights and remedies ordinarily available under s 67(1)-(5) (s 67(8)); or
*the secured party discovers after s 58 seizure or bringing action to recover a judgment that an accession that was collateral has been removed and not replaced by other goods of equivalent value and free from prior security interests, a claim may be advanced notwithstanding ss 67(2), (5) and (6) against the debtor for the value of the accession (s 67(8)).
:'''NOTE:''' The “seize or sue” rule does not apply to “true leases” but ''will'' apply to “security leases” or “conditional sales agreements”.  BC courts have been developing tests to distinguish between true leases and security leases. Disputes often arise over car leases. Creditors and debtors should consult with a lawyer who is familiar with this area of law when trying to figure out whether their contract is a true lease or a security lease. If the lease is a true lease the creditor has the option to seize and sue; see ''[https://www.canlii.org/en/bc/bcca/doc/2007/2007bcca144/2007bcca144.html?autocompleteStr=Daimler%20Chrysler%20Services%20Canada%20Inc%20v%20Cameron%2C%202007%20BCCA%20144&autocompletePos=1 Daimler Chrysler Services Canada Inc v Cameron'', 2007 BCCA 144].  


==== c) Consequences of Electing to Proceed Against Collateral ====
:'''NOTE:''' Individuals should check their credit history regularly. Industry specialists suggest once per year. Credit reporting agencies will send a person a copy of their credit history by regular mail for free. As each agency operates in a different matter, individuals are encouraged to request their credit history from both agencies, as they will likely be different.
 
Under s 67(2), an election to proceed against the collateral results in the extinguishment of the debtor’s obligations under the security agreement or any related agreement (with the exception of land mortgages executed before July 1, 1973), thereby automatically releasing any guarantor or indemnitor of the obligations contained in the security agreement.  However, ss 67(3) and 67(4) contain exceptions.
 
Since proceeding against the collateral precludes the creditor from recovering the deficiency of the debt, the creditor is well advised to collect as much of the debt as possible, from other sources prior to seizing the goods.  Remember, however, that if the creditor collects 2/3 or more of the debt, they lose the right to seize the goods.
 
 
==== d) Consequences of Electing to Sue ====
 
'''An election to sue results in the following consequences for the creditor:'''
*Under s 67(6), if the creditor gets a judgment against the debtor and seizes the collateral pursuant to a writ of seizure and sale, the right of recovery is limited to the gross amount realized from the sale of the collateral;
*Under s 67(10), commencement of proceedings against the debtor extinguishes the security interest of the creditor in the goods. 
 
Therefore, the sale proceeds become subject to a bankruptcy stay; and the creditor may have to share the proceeds of the seizure and sale with other creditors as they will no longer have priority based on secured creditor status.
Exceptions include cases of fraud or cases where the stay is unjust.  Where there is alleged fraud or the stay is unjust for other reasons, the creditor can apply to the court to have the stay removed against them specifically.  Generally, the stay is removed so that litigants can continue their litigation.
 
== B. Unsecured Creditors ==
 
A creditor initiates legal proceedings for one obvious and specific purpose: to permit that creditor to obtain a judgment and collect the debt  owed. There may be cases where such action is not taken, for example, if the debtor has no assets and is not likely to ever have assets. There are also instances where a creditor may be legally prevented from initiating proceedings against a debtor, for example, if the debtor files an assignment in bankruptcy. These issues will be discovered when the debtor’s assets, if any, are identified at a Payment Hearing in Small Claims Court, or in the Examination in Aid of Execution or Subpoena to Debtor Hearing in Supreme Court (see [[Checklist for Examination in Aid of Execution for Creditors%27 Remedies (10:App B) | Appendix B: Checklist for Examination in Aid of Execution]]). However, when a debtor has or may have assets, the creditor may wish to obtain a judgment on the debt to execute against assets of the debtor.
 
=== 1. The Creditor Assistance Act ===
 
Before this Act, the common law position was that priorities among execution creditors were determined in relation to the time the writs were filed. The creditor who filed the first writ would be paid in full, and then the next, and so on.
 
The principles of the ''Creditor Assistance Act'' allow creditors to give debtors time to pay, and not prejudice the patient creditor over another who files as soon as the debt is due. Section 3 provides that on execution, all creditors who have filed a writ will receive their share on a ''pro rata'' (or “rateable”) basis. ''Pro rata'' means that each creditor will receive a share of the funds available for distribution that is proportionate to their share of the debtor’s total debt.
 
Exceptions to this principle of pro rata distribution allow preference to sheriff’s costs, costs to the creditor at whose instance the seizure and levy were made, and wage claims that do not exceed three month’s wages, or salary. Further, the ''Family Maintenance Enforcement Act'', RSBC 1996, c 127 provides that proceeds realized on execution  under that Act are not subject to distribution under the ''Creditor Assistance Act''. In addition, some statutory liens and charges may take priority over the rateable distribution under the Act.
 
:'''NOTE:''' Payments made pursuant to a foreclosure sale of land will be made in the order that judgments are registered at the Land Title Office, and not on a pro rata basis.
 
==== a) Money to be Levied by Execution ====
 
Under s 3, once the sheriff collects money, an event called a levy, the persons who qualify under the Act distribute it. These persons must  have filed a writ of execution prior to the levy or must file a writ within one month of the date notice of the levy was entered. Where the creditor does not have a judgment against the debtor at the time of levy, and the claim is for debt, the creditor may obtain a certificate of claim under  the ''Creditor Assistance Act''. If this certificate is delivered to the sheriff within one month of the levy, the creditor may participate in the rateable distribution. The procedure for the certificate of claim is in ss 6 – 21 of the Act.
 
==== b) Contest of the Creditor’s Claim ====
 
'''Under s 14, on receiving an affidavit of claim the execution debtor may file and serve an affidavit of good defense to the claim within 10  days of the original service.''' The court may vary this length of time upon application. The distribution is halted pending verification of the validity of the claim.
 
Besides the debtor, another creditor may contest the claim (s 15). Grounds for filing include an allegation that there is no debt due in good faith from the debtor to the claimant, or an allegation that the claim is not one of debt as required by s 6 of the ''Creditor Assistance Act''. A claimant whose claim is contested must make an application to the Supreme Court of British Columbia within eight days of being notified; otherwise, the claim will be deemed to have been abandoned.
 
Under s 12, if the amount levied does not satisfy all of the writs of execution and certificates of claim, the sheriff is authorized to make a further seizure of the execution debtor’s personal property to satisfy all writs and certificates of claim.  In addition, the certificate, if issued, remains in force for three years and may be renewed similarly to a writ of execution.
 
=== 2. Execution ===
 
Under s 55 of the ''Court Order Enforcement Act'' [''COEA''], any judgment creditor may have the property of the judgment debtor seized and sold  by the sheriff to satisfy the amount owing under the judgment. Section 60 of the ''COEA'' directs that any surplus after payment of the judgment, interest, and reasonable costs of seizure and sale be paid to the debtor. 
 
=== 3. Exemptions from Seizure ===
 
Section 71(1) of the ''COEA'' creates categories of exemptions for the personal property of debtors with the specific amounts set by regulation. Debtors are allowed:
#Necessary clothing, medical and dental aids that are required by the debtor and their dependents;
#$4,000 for household furnishings and appliances;
#$5,000 for one motor vehicle if the debtor is not a maintenance debtor; 
#$2,000 for one motor vehicle if the debtor is a maintenance debtor;
#$10,000 for tools and other personal property that the debtor uses in their occupation.
 
In addition, s 71.1(1) of  the ''COEA'' exempts the principal residence of the debtor; $12,000 is the prescribed amount of equity exemption if the debtor's principal residence is located within the boundaries of the Capital Regional District or the Greater Vancouver Regional District. If the debtor’s principal residence is located outside of these boundaries, $9,000 is the prescribed amount of equity exemption. These values are calculated using the net equity. 
 
Section 71.3 of the COEA specifies that property in registered plans may be exempt from seizure as well (including Deferred Profit Sharing Plans, Registered Retirement Income Funds and/or Registered Retirement Savings Plans).  In order to qualify for an exemption, the plan must be registered similar to the Registered Retirement Savings Plan  However, there are some employee DPSPs that are not registered and exempt from seizure.  Another exception to this rule is if property was contributed to the plan after or within 12 months before the date on which the debt became due.
 
A “maintenance debtor” has the same meaning as a “debtor” in s 1(1) of the ''Family Maintenance Enforcement Act''.
 
:'''NOTE:''' Refer to BC Reg 28/98 (Court Order Enforcement Exemption Regulations) for further details regarding exemptions under the ''COEA''. Where there are competing priority interests between judgment creditors and secured parties, each party should seek the assistance of counsel.
 
:'''NOTE:''' The execution remedy is available to an unsecured creditor only after they have obtained judgment against the debtor.
 
:'''NOTE:''' The B.C. Court of Appeal decision in ''[https://www.canlii.org/en/bc/bcca/doc/2012/2012bcca46/2012bcca46.html?autocompleteStr=Atwal%20(Re)%2C%202012%20BCCA%2046%20&autocompletePos=1 Atwal (Re)'', 2012 BCCA 46] confirmed that a debtor whose property is sold by a trustee under  the ''Bankruptcy and Insolvency Act'', RSC 1985, c B-3 [''BIA''] is entitled to the above exemptions if the value of their property exceeds that which is prescribed in the legislation. Thus, if a debtor’s vehicle, valued in excess of $5000 is sold by a trustee in bankruptcy, the debtor is entitled to $5000 of the sale price, as provided by the exemption.
 
Any goods, chattels and effects of the judgment debtor (''COEA'', s 55), money, bank notes, cheques, or other securities for money, such as  shares of an incorporated company in British Columbia (s 64; ''[https://www.canlii.org/en/bc/bcsc/doc/1984/1984canlii722/1984canlii722.html?autocompleteStr=Peligren%20v%20Ajac%E2%80%99s%20Equipment%20(1982)%20Inc%20(1984)%2C%2056%20BCLR%2017%2C%20%5B1984%5D%205%20WWR%20563%20(SC)&autocompletePos=1 Peligren v Ajac’s Equipment'' (1982) Inc (1984), 56 BCLR 17, [1984<nowiki>]</nowiki> 5 WWR 563  (BCSC)]), and any legal or equitable present, future, executory or contingent interest in land (s 81) may be seized after the exemptions from s 71(1) of the ''COEA'' are applied.
 
The secured creditor takes the secured goods subject to the security interest of the conditional seller or chattel mortgagee. Where the debtor is a conditional buyer or a chattel mortgagor, a sheriff or bailiff may seize secured goods. Sheriffs, however, are usually reluctant to seize collateral unless there is clearly equity in it. In such cases, the secured creditor cannot seize a greater interest than the debtor has. 
 
'''Sections 71(23) and (34) set out three exceptions to the personal property exemptions provided in s 71(1) of the ''COEA'':'''
*a) the debtor cannot exempt goods identical to the goods that were the subject of the contract in question;
*b) a trader cannot claim any goods that are part of their stock-in-trades; and
*c) Corporate debtors cannot avail themselves of the personal property exemption.
 
In addition, s 65 of the ''Insurance Act'', the Insurance Act, RSBC 1996, c 226 allows for the exemption of certain insurance policies. Section 65(1) states that  if insurance money has already been payable then it is exempt; essentially creditors cannot attach once money has been transferred. Section  65(2) states that insurance money and the rights and interests of the insured in a life insurance contract are exempt from execution or seizure, as long as there is a designation in favour of a preferred beneficiary (immediate family as defined by the act) of the person whose life is insured.
 
'''The ''Bankruptcy and Insolvency Act'', 1985, s 67(1)(b.3) now shields all RRSP contributions from seizure in a bankruptcy, except those made  in the 12 months prior to bankruptcy.''' 
 
Certain interests have been held to fall outside s 71 and therefore are not exempt from seizure.  Partial interest and equitable interests do not fall within s 71 and thus, for example, a purchaser under a conditional sales agreement cannot prevent seizure of the goods sold under the agreement.  Similarly, the section does not apply to a charging order or a garnishing order since the section only refers to “forced seizure and sale”.  Thus, monies in court and debts or wages being garnished cannot form part of the judgment debtor’s exemption under the ''COEA''.
 
==== a) Execution Procedure: Chattels, Money, Shares, Etc. ====
 
The judgment creditor obtains an order for seizure and sale (Small Claims Court) or a writ of seizure and sale (Supreme Court) directing the  sheriff or bailiff to seize and sell sufficient goods or securities to satisfy the debt plus expenses (''COEA'', ss 58 and 60). The seizure of  shares involves particular problems: see ss 64 and 65; see also ''[https://www.canlii.org/en/bc/bcsc/doc/1984/1984canlii722/1984canlii722.html?autocompleteStr=Peligren%20v%20Ajac%E2%80%99s%20Equipment%20(1982)%20Inc%20(1984)%2C%2056%20BCLR%2017%2C%20%5B1984%5D%205%20WWR%20563%20(SC)&autocompletePos=1 Peligren v Ajac's Equipment'' (1982) Inc (1984), 56 BCLR 17, [1984<nowiki>]</nowiki> 5 WWR 563 (BCSC)].
 
Where the sheriff seizes goods, the sheriff’s officers are entitled to assume that all the goods and chattels on the premises are the property  of the judgment debtor at the time of the seizure. The judgment debtor has a duty to claim that some of the property is personal property or  the personal property of others: see ''[https://www.canlii.org/en/bc/bcca/doc/1987/1987canlii2543/1987canlii2543.html?autocompleteStr=Supreme%20Auto%20Body%20v%20British%20Columbia%20(1987)%2C%2021%20BCLR%20(2d)%20101%20(CA)&autocompletePos=1 Supreme Auto Body v. British Columbia'' (1987), 21 BCLR (2d) 101 (CA)]. 
 
==== b) Execution Procedure: Land ====
 
:'''NOTE:''' Issues relating to land should be referred to a lawyer.
If the judgment creditor registers a judgment in any Land Title Office, a lien is created against the interest in the real property of the judgment debtor that is registered in the land registration district in which the judgment is registered (s 82 of ''Court Order Enforcement Act'').  Once a judgment is registered, the judgment creditor may seek a court order to have the sheriff sell the land (ss 92 and 96). If the land is held in joint ownership and the debt is in one owner’s name only, the enforcement proceedings are similar, but a creditor can only apply to have the judgment debtor’s portion of the land sold. In this case, the debtor’s joint tenancy interest is considered severed. The buyer/new owner of the partial interest in the land can be the judgment creditor, a third party, or the non-debtor owner. After the sale of the land, the new owner or the remaining non-debtor owner can bring an application under the Partition of Property Act to ‘buy out’ the new owner. '''The judgment creditor must renew the judgment after two years or it is extinguished''' (ss 83 and 91, COEA), unless it is a non-expiring judgment (i.e. a judgment registered under the ''Family Maintenance Enforcement Act'').
:'''NOTE: Where there is a conflict between the ''PPSA'' and the ''Land Title Act'', the ''Land Title Act'' prevails (''PPSA'', s 74).'''
 
==== c) Legal Advice on Execution Orders ====
 
Once the execution process has begun, the debtor usually has one final opportunity to pay. In the case of land, the sheriff may not sell until one month after receiving the order for sale (COEA s 100). The debtor should be advised to pay if possible because the amount recovered on a forced sale may not be as high as otherwise obtained on a normal sale of property.
 
=== 4. Garnishment ===
 
Garnishment is a judicial proceeding in which a creditor asks the court to order a third party who is indebted to the debtor to turn over to  the creditor any of the debtor’s property. The creditor is the garnishor. The third party is the garnishee. The ''COEA'' provides that a garnishing order may be obtained before or after judgment.
 
=== 5. Garnishment of Bank Accounts and other Accounts Receivable ===
 
==== a) Garnishment Before or After Judgement ====
 
A pre-judgment garnishing order is paid into court pending the outcome of the proceedings, and may be used in circumstances where the debtors ability to pay may be compromised before judgment.  A pre-judgment garnishing order is not available against wages.  The creditor’s action against the debtor must be for a liquidated (i.e. explicitly specified) or ascertained sum.  - damages for a breach of contract must be quantified as a term of that contract (see ''[https://www.canlii.org/en/bc/bcsc/doc/2010/2010bcsc409/2010bcsc409.html?autocompleteStr=Ocean%20Floors%20Ltd%20v%20Crocan%20Construction%20Ltd%20(2010)%2C%202010%20BCSC%20409&autocompletePos=1 Ocean Floors Ltd v Crocan Construction Ltd'' (2010), 2010 BCSC 409]).  A definition of liquidated sum is found in ''[https://www.canlii.org/en/bc/bcsc/doc/2005/2005bcsc920/2005bcsc920.html?autocompleteStr=Steele%20v%20Riverside%20Forest%20Products%20Ltd%20(2005)%2C%202005%20BCSC%20920&autocompletePos=1 Steele v Riverside Forest Products Ltd'' (2005), 2005 BCSC 920]. The accompanying affidavit to a pre-judgment garnishing order must disclose the nature of the cause of action and the specified amount claimed.  Note that recourse to a pre-judgment garnishing order is extraordinary and therefore the provisions of the ''COEA'' must be strictly complied with or it may be overturned. The creditor will generally swear an affidavit in support of a pre-judgment garnishing order by themself.
 
A creditor who begins an action for a liquidated sum may seek to garnish a debt owed to the debtor to have the money paid into court to “ensure” payment if the creditor is successful in court. However, remember other judgment creditors may also be trying to ensure payment.
 
If the order has not yet been made and the debt is valid, it may be in the debtor’s best interest to pay the creditor if possible, since the debtor is liable for payment of the costs of the garnishing proceedings.
 
If the order has already been made, the creditor should examine the  possibility of having the garnishment released and an order for payment by instalments substituted under s 5, or in the case of garnishment of  wages, having the exemption lowered under s 4. The creditor should be advised that hardship may be used as a defence.
 
A garnishee who wishes to dispute indebtedness to the defendant or judgment debtor, should file a dispute notice as soon as possible with the court. If they do not dispute it, a second order, called an order absolute may be issued (see [[Relevant Forms for Creditors%27 Remedies (10:App A) | Appendix A: List of Relevant Documents]]: '''Affidavit in Support of Garnishing Order After Judgment'''). This order operates as a judgment and execution may be taken against him or her. '''Inactivity could render a garnishee liable even if they never owed the money to the defendant/judgment debtor.'''
 
==== b) Which Debts Can be Garnished? ====
 
Any debt that is “due or accruing due” to a judgment debtor may be garnished by a judgment creditor.  This requires that the debt be an existing or perfected debt even though payment is not yet due.  Bank accounts can be garnished as long as it is not a joint bank account, except where the debt is owed jointly by the same parties or the creditor is exercising its right of offset.  For example, a creditor bank may garnish a debtor’s personal account, including a joint account, to offset the debtor’s debts to that bank where the amounts owed to each joint account holder can be determined.  Term deposits may be garnished as long as any conditions on withdrawal are mere matters of procedure and administration, though there may be complications where the account is transferable. 
 
'''Registered plans such as RRSPs and RRIFs are exempt from enforcement processes under s 71.3 of the ''COEA''.''' However, contributions made in the 12 months preceding the date of judgment may be enforced on. Also, many pension plan payments are exempt pursuant to s 63 of the ''Pension  Benefits Standards Act''. Section 15 of the ''COEA'' provides that a creditor may seek a garnishing order that will attach a debt maturing in  the future. This form of garnishing order may be useful in attaching monthly payments, since all future monthly payments can be attached by one order rather than issuing a garnishing order for each payment. 
 
==== c) Procedure for Pre-Judgment Garnishing Order ====
 
In order to obtain a pre-judgment garnishing order, a civil action must first be commenced by a creditor for the amount of the debt.
 
The creditor must swear in an affidavit that an action on the debt is pending, provide the date of its commencement, the nature of the cause of action, and the actual amount (i.e. liquidated or ascertained sum) of the debt, claim or demand, and that the same is justly due and owing.  The affidavit may be sworn before or after the action is commenced (although the form of the affidavit will differ).  The affidavit must also state that another person, the garnishee, is indebted to the debtor, and provide the garnishee’s address (COEA, ss 3(2)(e) and (f)).
 
The garnishing order may be set aside if the procedural requirements are not strictly complied with because it is considered an extraordinary remedy. For example, a pre-judgment garnishing order will be set aside where the affidavit in support sets out an amount including interest  and the affidavit does not allege the existence of an agreement on the part of the debtor to pay interest: see ''Nevin Sadler-Brown Goodbrand Ltd. v Adola Mining Corp. and Prophecy Developments Ltd.'' (1988), 24 BCLR (2d) 341. '''Never''' claim court ordered interest in the affidavit.
 
The court has discretion to set aside a pre-judgment garnishing order, but the applicant must submit a meritorious set-off claim or show  extraordinary hardship arising out of the garnishment. While the plaintiff’s solicitor may swear in an affidavit as to what is the amount owing (see ''[https://www.canlii.org/en/bc/bcsc/doc/1987/1987canlii2685/1987canlii2685.html?autocompleteStr=Cementation%20&autocompletePos=2 Caribou Construction v Cementation Co (Canada)'' (1987), 11 BCLR (2d) 122 (SC)]; ''[https://www.canlii.org/en/bc/bcsc/doc/1994/1994canlii845/1994canlii845.html?autocompleteStr=Trade%20Fortune%20Inc%20v%20Amalgamated%20Mill%20Supplies%20(1994)%2C%2089%20BCLR%20(2d)%20132%20(SC)&autocompletePos=1 Trade Fortune Inc v Amalgamated Mill Supplies'' (1994), 89 BCLR (2d) 132 (SC)]), most practitioners prefer never to swear an affidavit to support a pre-judgment garnishing order. Whenever possible, the plaintiff should swear the affidavit: see ''Samuel and Sons Travel v Right on  Travel'' (1987), 19 BCLR (2d) 199. Practitioners should only swear an affidavit where they are personally aware of the facts and not just based on what a client alleges as fact. The remaining procedure is the same as for post-judgment garnishing orders (below) except that the court retains the money pending the action’s outcome.
 
==== d) Procedure for Post-Judgment Garnishing Order ====
 
Post-judgment garnishing orders are not held to the same level of scrutiny as pre-judgment garnishing orders.
 
In order to obtain a post-judgement garnishing order, a judgment creditor or their solicitor must swear an affidavit stating:
*a) that a judgment has been recovered;
*b) the amount that is unsatisfied;
*c) that another person, the garnishee, is indebted to the judgment debtor; and
*d) the address of the garnishee’s residence in the jurisdiction (s 3(2)).
 
The affidavit is filed in the court registry along with the form of order requested.    The garnishee is then to be served with a copy of the order, which commands them to pay the money into court.  A copy of the order must be served on the debtor at once, or within a time allowed by the judge or registrar by memorandum endorsed on the order . Failure to serve a garnishing order on a debtor “at once” may result in the garnishing order being set aside. Whether delayed service is fatal to a garnishing order depends on the circumstances of each case. See ''[https://www.canlii.org/en/bc/bcca/doc/1985/1985canlii539/1985canlii539.html?autocompleteStr=Skybound%20&autocompletePos=2 Skybound Developments Ltd. v. Hughes Properties Ltd.'' (1985), 1985 CarswellBC 219, 65 BCLR 79 (CA)] for a discussion on this topic. The garnishee may dispute indebtedness to the judgment debtor (see '''Section II.B: Legal Advice for Debtors Who are Garnished''', below).  Where the garnishee pays money, the court keeps the money until it is paid out to the judgment creditor under ss 11, 12, and 13.
 
Funds held jointly to the credit of the defendant and another person, who is not a party to the action, cannot be garnished, see ''[https://www.canlii.org/en/bc/bcca/doc/1984/1984canlii301/1984canlii301.html?autocompleteStr=238344%20BC%20Ltd%20v%20&autocompletePos=1 238344 BC Ltd v Patriquin et al'' (1984), 57 BCLR 224]. That case also cited cases of exceptions where a creditor bank exercised its right of offset, but ''238344 BC Ltd'' suggested these were wrongly decided.
 
==== e) Payment by Instalments ====
 
A debtor against whom a garnishing order has been made may apply for a release of the garnishing order, and for an order for the payment of the debt by instalments on the basis of hardship. This order, if granted (it is rare), will bind the debtor’s creditors, but will only continue for as long as the debtor is not in default on any payment for more than five days, and so long as no other garnishing order is issued against them for any other debt (s 5). There is an exception where a creditor who elects to have a garnishing order changed to payment by instalments will be barred from seeking a garnishing order after the debtor defaults (see ''[https://www.canlii.org/en/bc/bcsc/doc/1984/1984canlii332/1984canlii332.html?autocompleteStr=Bank%20of%20Montreal%20v%20Monsell%20&autocompletePos=1 Bank of Montreal v Monsell'' (1994), 58 BCLR 11 (SC)]). The creditor may apply to have the order  varied if new evidence of the debtor’s finances comes to light.
 
=== 6. Garnishment of Wages ===
 
==== a) Judgment Required ====
 
Garnishment of wages can only occur after a judgment (s 3(4)).
 
==== b) Deductions and Exempt Wages ====
 
70 percent of any wages due by an employer to an employee is exempt from seizure or attachment under a garnishing order. Therefore, only 30 percent of wages after statutory deductions (i.e. Employment Insurance premiums, Canada Pension Plan, Income Tax, etc.) can be garnished (s 3(5)). However, a single person cannot be left with less than $100 per month (or calculated pro rata for a shorter period), and a person with dependents cannot be left with less than $200 per month (or calculated pro rata for a shorter period) (s 3(5)). However, where wages are garnished to pay maintenance or support for the debtor’s family, the exemptions allowed to that person are 50 percent of wages not exceeding $600 per month or 33 and 1/3 percent of wages exceeding $600 per month (''COEA'' s.3(7)). These exemptions must not be less than $100 per month (s 3(7)).
 
Garnishment by the Family Maintenance Enforcement Program is called a Notice of Attachment. The ''Family Maintenance Enforcement Act Regulation'',  BC Reg 346/88 contains rules about exemptions from attachment. These rules are different than those found in the ''COEA''.
 
==== c) Variation of Exemption ====
 
A debtor whose wages are garnished may apply under s 4 of the COEA to have the exemption varied. The registrar or judge shall, within three days after receiving the application, notify persons affected by it and a hearing will be held within seven days.
 
With respect to maintenance orders,  under s 18(2) of the ''Family Maintenance Enforcement Act'', upon application by a creditor, the court can issue a garnishing order against the debtor without giving notice.
 
A separate garnishing order must be sworn and issued for each payment of wages to the debtor, since one garnishing order is good for only one  debt that is owed to the debtor.
 
==== d) Employer’s Liability for Firing Employee ====
 
No employer may fire or demote an employee because that employee has their wages garnished. An employer who does so is liable on summary conviction to a fine of up to $500 or up to three months in jail or both, and an employee must be reinstated with back pay if they are fired for garnishment of wages (s 27). One should consider the fact that the garnishment may have been the final reason among others for termination, and may be difficult to prove.
 
=== 7. Garnishment of Statutory Benefits ===
 
Benefits including Employment Insurance, Canada Pension Plan, Old Age Security, workers compensation, social assistance and provincial disability benefits are usually exempt from garnishment, seizure or attachment.  The exemptions are found in the statutes that govern these respective benefit programs. 
 
However, this exemption from garnishment does not apply to offsets or to debts to the government.  For example, debts to the federal crown may be collected from Canada Pension Plan benefits. Canada Revenue Agency is now routinely offsetting CPP and other benefits.  Social assistance (welfare) is the only kind of statutory benefit that is truly exempt from garnishment. This also applies to Canadian Emergency Response Benefits and Canada Child Benefits received under the COVID-19 Emergency Response Act. '''The creditor or debtor should also be advised that this protection against garnishment may not extend to a bank account into which the exempt income is deposited if it is commingled with other funds.'''
 
=== 8. Enforcing a Judgment Outside of BC ===
 
It is possible to register a B.C. judgment in many foreign jurisdictions, including other Canadian provinces.  The requirements for registration may differ from jurisdiction to jurisdiction, so the judgment creditor should consult with counsel in the destination jurisdiction to determine the specific requirements.
 
It is also possible, and sometimes more efficient, to sue on the judgment in the province or country where the judgment debtor’s assets are located.  Normally the foreign court requires a certificate.  To obtain a certificate in BC, creditors must file an application to the court that asks for a certificate to be issued (''COEA'' s 30).
 
== C. Unsecured Creditors: Remedies and Options Before Judgment (Liens) ==
 
A lien is a claim, encumbrance, or charge on property (real or personal) for payment of a debt, obligation, or duty. In many cases, a creditor is entitled to place a hold or lien over specific property that has benefitted from the individual’s material or labour. It acts as security from the individual’s material or labour and as security for the payment to the creditor. '''Property liens are complicated and potentially serious. Please refer to a lawyer.''' The most common liens are listed below.
 
=== 1. Liens on Land (Builder’s Liens) ===
 
:'''NOTE:''' Builder’s lien issues involve limitation periods and real property registrations and filings. The '''time limitations are extremely  strict'''; solicitors have been known to lose suits because they filed a day late. '''All cases should be referred to a lawyer.''' Refer to: ''Builder’s Lien Act'', SBC 1997, c 45.
 
Under the current ''Builder’s Lien Act'', a worker, material supplier, contractor, or sub-contractor who does or causes to be done any work  upon, or supplies material, or both, for an improvement, has a lien for the price of the work and material, upon the interest of the owner in the improvement, upon the improvement itself, upon the material delivered to the land, and upon the land itself (s 2). “Price” does not include interest on outstanding accounts or court-ordered interest: see ''Horseman Bros. Holdings Ltd v Lee'' (1985), 12 CLR 145 (BCCA).
 
After a claim of lien is filed against land, the lien-holder may enforce their claim by obtaining a court order for the land to be sold (s  31). When a writ is issued, the lien holder must register a certificate of pending litigation against the land within one year of the date of its filing (s 33(1)), which prevents any dealings with the title to the land until after the court determines the validity of the claim. No claim of lien can be filed if the claim is for less than $200 (s 17).
 
==== a) Procedure ====
 
A claim of lien on land is filed in the Land Title Office (s 33(1)). A claim of lien must be in the prescribed form or it is extinguished (s 22). It takes effect from the time when work began, or when the first material was supplied for which the lien is claimed. A claim of lien has  priority over all judgments, executions, attachments, and receiving orders recovered, issued, or made after that date (s 21).
 
==== b) Limitation Period ====
 
The time for filing a claim of lien is governed by s 20 and the time limitations are strict. '''If a certificate of completion has been issued for a contract or subcontract, the claims of lien of the contractor, subcontractor, or any person engaged by or under the contractor or subcontractor must be filed no later than 45 days after the date on which the certificate of completion was issued.''' If there is no  certificate of completion, a claim of lien may be filed no later than 45 days after the head contract or improvement has been completed, abandoned, or terminated.
 
Under s 4, if a person agrees to have repairs done, they must withhold 10 percent of the value of the work or material as they are actually provided under the contract or subcontract, or the amount of any payment made on account of the contract or subcontract price, whichever is greater, from the contractor for a period of 55 days after the certificate of completion is issued.  This covers the possibility of having to pay workers, subcontractors, and suppliers who were not paid for their services by the contractor.  This holdback must not be retained from a worker, material supplier, architect, or engineer (s 4(6)).  These funds are to be paid into a separate trust account at the time of payment.
 
In addition, all improvements done with the knowledge, but not at the request, of the owner will be held to be done at the request of the owner (s 3(1)).  This rule does not apply to improvements made after the owner files a notice of interest in the Land Title Office.  A notice of interest is a prescribed form warning other persons that the owner’s interest in the land is not bound by a lien claimed under the Act for an improvement on the land unless that improvement is undertaken at the express request of the owner (s 1).
 
Unless an action to enforce a claim of lien is started and a certificate of pending litigation is registered in a Land Title Office within one year, the lien is extinguished (s 33(5)).  Note that the owner may require the lien-holder to commence an action within 21 days, by sending the holder of a claim of lien notice in writing (s 33(2)).
 
 
 
=== 2. Liens on Chattels (Repairer’s Liens) ===
 
==== a) Possessory Lien and Right to Sell ====
 
Under the ''Repairer’s Lien Act'' [''RLA''] RSBC 1996, c 404 [''RLA''] every mechanic or other person who has bestowed money, skill or materials upon any chattel for its improvement, has a common-law possessory lien on the chattel while it remains in their possession.  The lienholder may keep the chattel until paid. Where the person holds the chattel for 90 days, they may sell it upon compliance with statutory provisions (s 2).  If the lienholder gives up possession prior to filing a lien, they lose the lien (except with liens on automobiles and aircraft, etc.) and are restricted to ordinary remedies in court.
 
=== 3) Liens on Automobiles, Aircrafts, Boats and Outboard Motors ===
 
If a garage keeper relinquishes possession of an automobile, aircraft, boat or outboard motor, they do not lose the lien, provided that the debtor,  before giving up possession, signed an acknowledgement of indebtedness (e.g. invoice, statement of account, etc.) (s 3(1)).
 
==== a) Procedure ====
 
Where a garage keeper gives up possession of an automobile, etc., and afterwards files a financing statement with the Personal Property Registry to register the lien, the lien is not lost notwithstanding the surrender of possession and the garage keeper may enforce the lien by issuing a warrant for seizure to a licensed bailiff or the sheriff (s 11).  The automobile or aircraft may then be sold by following the procedures for the sale of chattels set out in s 2 (s 12).  A warrant may only be issued within 180 days of filing the lien (s 11).
 
==== b) Limitation Period ====
 
'''The garage keeper has, pursuant to s 3 of the ''RLA'', 21 days to register a lien once they have given up possession.'''
 
'''On the registration of a financing statement, the lien will expire after 180 days, unless the automobile, etc., has been seized within that period (s 4).'''
 
=== 4. Buyer’s Lien ===
 
When a buyer has made a partial or full payment to a seller - and the goods are unascertained or future consumer goods, the buyer can place a lien against all goods that are in, or will come into, the possession of the seller that correspond with the description or sample of goods agreed upon (See Part 9 of the ''Sale of Goods Act''). This holds as long as the goods were not sold to someone else. The buyer also has a lien against any bank account where the seller normally deposits  the  proceeds  of  sales.  This  lien  has  priority  over  all  other  security  interests, but generally is not valid in bankruptcy. Generally, provincial liens will only be recognized in bankruptcy if the specific property can be identified. If the seller has maintained records or documents that clearly identify the goods  for which a deposit was paid, the buyer may be entitled to the lien. Where the seller maintains a separate trust account, the buyer can file a property claim for the trust funds which is in priority to other security interests. For examples of the trustee in bankruptcy (of the buyer’s estate) having priority over unpaid sellers, see ''[https://www.canlii.org/en/bc/bcsc/doc/2006/2006bcsc1414/2006bcsc1414.html?autocompleteStr=In%20the%20Bankruptcy%20of%20Ian%20Gregory%20Thow%2C%202006%20BCSC%2C%201414&autocompletePos=1 In the Bankruptcy of Ian Gregory Thow'', 2006 BCSC, 1414] and ''[https://www.canlii.org/en/bc/bcsc/doc/2001/2001bcsc1476/2001bcsc1476.html?autocompleteStr=Anderson%27s%20Engineering%20Ltd%202001%20BCSC%201476&autocompletePos=1 In the Matter of the Bankruptcy of Anderson's Engineering Ltd.'' 2001 BCSC 1476]. 
 
The seller can discharge the lien by handing over the good or returning the buyer’s deposit, but the latter will not relieve the seller from the possibility of suit for breach of contract. The buyer’s lien permits the buyer, upon application to court, to have goods seized and sold and have the proceeds delivered, or just have the goods delivered.
 
=== 5. Liens for Storage ===
 
The ''Warehouse Lien Act'', RSBC 1996, c 480 provides that every warehouse owner or operator has a lien on goods deposited with them for storage, whether  deposited by the owner of goods or by their authority, or by any person entrusted with possession of the goods by the owner, or by their authority (s 2(1)). This right does not apply to unpaid charges for goods previously stored; see ''[https://www.canlii.org/en/bc/bcsc/doc/1980/1980canlii495/1980canlii495.html?autocompleteStr=Re%20Dutton%20Pacific%20Forest%20Products%20Ltd%20(1980)%2C%20117%20DLR%20(3d)%20507%20(SC)&autocompletePos=1 Re Dutton Pacific Forest Products Ltd.'' (1980), 117 DLR (3d) 507 (SC)], sub nom ''Squamish Terminals Ltd. v Price-Waterhouse Limited''. After the warehouser gives the appropriate  notices, the goods may be sold to collect the charges (ss 3 and 4).
 
=== 6. Legal Advice on Liens ===
 
If the lien is valid and the debtor wishes to discharge the lien, but disputes the amount of the claim, the debtor may wish to make the payment to the court by application under s  23(1) of the ''Builder’s Lien Act''. This discharges the liability with respect to the Lien under s 23(2) The court will then assess the proper amount to be paid by receiving evidence, or directing a trial.


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Revision as of 00:01, 21 September 2020

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on August 10, 2020.
LSLAP Manual
LSLAP Manual
This page is from the
Law Students' Legal
Advice Program Manual.
See the full contents.
LSLAP Manual
Introduction
Chapters
10. Creditors and Debtors
 · I. Introduction

 · II. Governing Legislation and Resources
 · III. Creditors' Remedies
 · IV. Debtors' Options
 · V. Dealing with Debt
 · Appendix A: Relevant Forms

 · Appendix B: Examination Checklist
v • d • e



Being in debt is obviously stressful for debtors. Debtors should be made aware that measures can be taken against overeager creditors. Although creditors may choose to not initiate legal action, a debtor should not assume that they can ignore their responsibilities. The debtor may try to communicate with the creditor(s) in hopes of reaching an agreement about repayment, and to avoid potentially costly legal battles. However, this is only to be done when the debtor wishes to acknowledge the debt.

Under the Limitation Act, SBC 2012 c. 13. a creditor generally cannot succeed in pursuing a debtor after two years from the last payment or acknowledgement of the debt. Communications with creditors that acknowledge the debt will initiate a new two year time horizon in which a creditor is able to pursue the debtor. To avoid acknowledging a debt, it is important that the following phrase be included in the letter: “This communication is provided solely for the purpose of [state purpose of letter] and does not constitute an acknowledgement of the alleged debt described (above).” This should be carefully considered when a debtor is approaching the end of a two year timeline in which they will be relinquished of legal responsibility for the debt at issue. Since this change to the limitation period, several major creditors have been pursuing debtors through in house collections more aggressively, rather than sending the accounts to third party agencies. The limitation change may also be leading creditors to pursue debtors in court with greater frequency.

If an acknowledgement of the debt occurs, both the debtor and the creditor must be realistic about the situation. Both parties must assess the costs and delay involved in any litigation. In such negotiations, the latter factors may work in favour of the debtor.

A debtor may wish to seek legal advice before discussing or disputing a debt with a creditor, but this is not always necessary. If the debtor believes they do not owe the debt they should consider legal advice. If the debtor believes they owe the money but disputes the amount claimed, they may also want to consider legal advice. However, if the debtor simply cannot meet the payment terms, it is recommended that they seek credit counselling. See Section IV. Dealing With Debt.

Where a creditor is pressuring a debtor for payment, a debtor may send a “without prejudice” letter to the creditor explaining their position and/or offering a settlement. See Section III.F: Settlements, below for further information. When writing a Without Prejudice letter it is critical to include the following phrase: “This communication is provided solely for the purpose of [state purpose of letter] and does not constitute an acknowledgement of the alleged debt described above.”

A debtor cannot seek to avoid defending an action in court where that action takes place in another province on the grounds that the court lacks jurisdiction. An action under s 29 of the COEA to enforce an extra-provincial default judgment may proceed where the debtor was served but chose not to offer any defence to the original statement of claim. The creditor simply registers a judgment from another province in B.C., and it becomes a B.C. judgment. Furthermore, as a result of the decisions in Morguard Investments v De Savoye, [1990] 3 SCR 1077 and Beals v Saldanha, [2003] 3 SCR 416, 2003 SCC 72, American and other international default judgments can also be enforced in B.C.

The process for enforcing a foreign judgment is simplified where the judgment originates from one of the reciprocating states listed in the COEA: http://www.bclaws.ca/civix/document/id/loo95/loo95/courtorderenflist. Judgments from one of the foregoing reciprocating states can simply be registered in the B.C.S.C.

If the judgement does not originate from a reciprocating state, a creditor must bring an action on the judgment or on the original cause of action instead. This process requires a trial on the judgment or original action, where the court will determine whether to enforce the foreign judgment.

NOTE: There have been judgments for the creditor where the creditor pursues the debtor after the two-year timeline. This may happen where the creditor is inexperienced or neglectful, the debtor does not defend themselves, or the period between payments is not reviewed. If the judgment has been issued by the court, it may be more cost-effective to try and settle the matter with the creditor instead of challenging it in court.

A. Legal Advice for Debtors Under Secured Transactions

The information in this section is specific to the defendant’s point of view, but is most usefully read in conjunction with Section II: Creditors’ Remedies. If a student needs more information, that section may help to complete the picture.

Where the debtor is in default under a security agreement, s 56 of the PPSA provides that the secured party has against the debtor the rights and remedies provided in the security agreement (provided such do not derogate those rights given to the debtor by the PPSA) as well as those specifically provided by the Act.

Sections 58 and 59, contain rules for seizing and disposing of collateral. These sections provide that, unless the security agreement states otherwise, where the debtor defaults on their payment, the creditor may elect to take possession of the collateral pursuant to the contract, dispose of the collateral and then sue for any amount still owing. Section 67, provides for a more limited set of remedies where the collateral takes the form of consumer goods – known as the “seize or sue” rule. Formerly, under legislation repealed by the PPSA, all creditors could only seize or sue but not both. The principle of “seize or sue” still applies to “consumer goods” (see Section II.A.6.: Seizure and Section II.A.7: Disposal of Collateral); it no longer applies to commercial goods. The PPSA defines “consumer goods” as those goods that are used or acquired for use primarily for personal, family or household purposes. “Commercial goods” are those goods used for commercial purposes.

1. Notice

Subject to the circumstances where notice is not required as per s 59 (17) (i.e. for perishable collateral, collateral requiring disproportionately high storage costs relative to its value, etc.), the requirements for notice are outlined in ss 59(6) and (10): the secured party or receiver, as the case may be, must provide at least 20 days’ notice of an intention to dispose of the collateral to parties including the debtor and any other creditor. The clinician should check to make sure that the debtor received notice in time and in the correct form. See Section II.A.8: Notice to Dispose of Collateral for a complete account of the notice requirements that must be met under the PPSA.

NOTE: The forms of notices under the PPSA depend on a number of variables, including the nature of the security and the terms of the security agreement. Creditors or debtors seeking advice concerning the validity of notices should be referred to a lawyer.

2. Limitation of the Right of Seizure

With respect to collateral which is a “consumer good,” where the debtor has paid at least two-thirds of the total amount secured, the creditor may not seize the good without first obtaining a court order.

3. Rights of a Debtor on Realization

The PPSA preserves the debtor’s (but not the secured party’s) rights and remedies under other statutes that are not inconsistent with the PPSA, as well as the specific rights and remedies provided in the security agreement, ss 17, 17.1 and 56(2)(b).

4. Rights of Redemption and Reinstatement

Under s 62, a debtor has redemption rights. Any person entitled to notice of a pending disposition of collateral may “redeem” the collateral by tendering to the secured party fulfilment of the obligations secured by the collateral plus the reasonable expenses incurred by the secured party associated in seizing the collateral or otherwise preparing it for disposition. The aforementioned obligations may simply be the amount in arrears; however, it is more often the case that an acceleration clause applies, and that the obligations will be the total amount of the debt. Where the security agreement contains an acceleration clause, the debtor may apply to court for relief from the consequences of default or for an order staying enforcement of the security agreement’s acceleration provision.

Where the collateral is a “consumer good”, the calculation of the obligation secured and the obligation that must be tendered is varied. The debtor may “reinstate” the security agreement by paying only the monies actually in arrears – negating the operation of any acceleration clause. The debtor may waive this right but any such agreement must be in writing after default. Note that the number of times the debtor may reinstate the security agreement is limited depending on the period of time for repayment set out in the security agreement; however, the frequency of reinstatement may be varied by agreement between the parties.

5. Execution

See Section II.B.2: Execution.

B. Legal Advice for Debtors Who are Garnished

The details of how an order for garnishment is obtained are found in the creditor’s remedy portion of the chapter, but debtors should be reminded that hardship may be a defence to garnishment. Therefore, a pre or post-judgment garnishment order may be varied where it would be unfair to the judgment debtor; it is generally easier to have a pre-judgment order varied.

Under ss 3 or 4 of the COEA, a judge has the discretion to set aside a garnishing order once the debtor has made an application. A judge will consider:

For pre-judgment orders only:

  1. the strengths and weaknesses of the defendant’s defence to the claim.

For both pre and post-judgment orders:

  1. whether the judgment leaves the debtor with an inordinately low cash flow;
  2. whether there is a risk that the grant or continuance of the order will cause an injustice to the debtor;
  3. whether there is a possibility of abuse of process by the creditor; and
  4. whether the garnishment of certain payments, such as social assistance benefits, run counter to public policy

Furthermore, ss 3(5) and 4(4) of the COEA describes the limits to which a debtor’s wages may be garnished. Thus, if a debtor has a low income or has savings they depend on for the necessities of life, they can have the amount that is being garnished (or proposed to be garnished) reduced, the terms of the order varied, or the garnishment ended. A person who is subject to a Notice of Attachment under the Family Maintenance Enforcement Program can also try to have the amount that is being ‘garnished’ reduced. Additionally, a garnishing order from a civil action has to be renewed monthly, while a garnishing orderfor maintenance does not.

If the debtor receives income from a statutory benefit that is exempt from garnishment (e.g social assistance or COVID-19 benefits), they should be advised as to how to protect their money after it is paid to them. The right of offset allows banks to seize deposited funds from an account at that institution to cover a loan or account in default. If funds which are exempt from garnishment are deposited into a regular account that is commingled with other funds, they will not be protected from seizure by the financial institution. Their income should be safe if it is paid by direct deposit into an account at an institution to which they do not owe any money. No other deposits should ever be made into this account. It is also helpful to speak to a branch manager so that they understand the purpose of the account. A debtor should be advised that they have a right to open a personal bank account at a chartered bank, even if they do not have a job or do not have money to put in the account right away. However, the applicant can be refused if the bank employee suspects fraud or experiences harassment from the applicant. For further information, see: http://www.fcac-acfc.gc.ca and navigate through the website by clicking on Consumers > Resources > Publications > Banking > Opening a personal banking account: understanding your rights.

NOTE: This right to open a personal account does not extend to credit unions. Credit unions are regulated under provincial legislation rather than the federal act and they have wider powers to deny applicants. For further information, visit http://www.fic.gov.bc.ca.

C. Harassment by Debt Collectors

The Business Practices and Consumer Protection Act, SBC 2004, ch 2 [BPCPA] provides for the licensing and regulation of debt collectors, which is carried out by Consumer Protection BC. The statute provides that jurisdiction is determined by the location of the debtor. Under the statute, Consumer Protection BC has wide powers of investigation.

1. Unreasonable Collection Practices

A collector must not communicate with a debtor, a member of the debtor’s family, a relative, a neighbour or the debtor’s employer in a manner or with a frequency as to constitute harassment. The following constitutes harassment:

  • a) using threatening, profane, intimidating or coercive language;
  • b) exerting undue, excessive or unreasonable pressure; and/or
  • c) publishing or threatening to publish a debtor's failure to pay (BPCPA, s.114).

A collector cannot communicate with a debtor at the debtor’s place of employment unless one of the following conditions is met:

  • a) the collector does not have the home address or telephone number for the debtor and the collector contacts the debtor solely for the purpose of requesting the debtor's home address or telephone number or both;
  • b) the collector has attempted to contact the debtor at the debtor’s home address or telephone number, but the collector has not contacted the debtor in any of these attempts (the collector is limited to one verbal attempt at the debtor’s place of employment (s 116(2)), meaning one call even if the debtor doesn’t answer or hangs up); or
  • c) the collector has been authorized by the debtor to communicate with the debtor at the debtor’s place of employment (s 116 (1)).

When the collector is contacting the debtor, they must indicate the name of the creditor with whom the debt was incurred, the amount of the debt, and the identity and authority of the collector to collect the debt from the debtor (s 116 (3)).

The collector must only contact a debtor through writing if the debtor provides a mailing address and notifies the collector in writing that they wish to be contacted only by writing. (s 116 (4)). Be aware that ignoring written communications could result in a collector starting legal proceedings, notice of which would be sent via writing, so a debtor should always be reading the communications and carefully considering if and how they should respond.

In collecting or attempting to collect payment of debt, a collector must not supply any false or misleading information; misrepresent the purpose of communication; misrepresent the identity of the collector or, if different, the creditor; or use, without lawful authority, a summons, notice, demand, or other document that suggest or implies a connection with any court inside Canada (s.123).

If a creditor does not obey the BPCPA, the debtor may report the creditor to Consumer Protection BC.

2. Limits on Right of Seizure

Under s 122, no collector, whether on their own behalf or on behalf of another, directly, indirectly, or through others, shall:

  • a) unless there is a court order to the contrary, remove from the debtor’s private dwelling any personal property claimed under seizure, distress, or repossession, in the absence of the debtor, the debtor’s spouse, the debtor’s agent, or an adult resident in the debtor’s dwelling;
  • b) seize, repossess or levy distress against any chattel not specifically charged or mortgaged, or to which legal claim may not be made under a statute, court judgment, or court order; or
  • c) remove, seize, repossess, or levy distress against any chattel during a day or during the hours of a day when such removal, seizure, repossession or distress is prohibited by regulations under this Act.

3. Consequences of Contravention of the Business Practices and Consumer Protection Act

Where there is evidence of misconduct by the debt collector, the Director may suspend, cancel, or refuse to issue their licence (s 146(1)). Such conduct includes (s 146(2)):

  • a) contravening this Act or regulations;
  • b) failing to meet the minimum requirements for a licence;
  • c) contravening a condition of a license;
  • d) engaging in a pattern of conduct by the debt collector that shows that they are unfit to have a licence; or
  • e) being convicted of an offence under Canadian law for conduct that shows they are unfit to have a licence.

4. Legal Advice for a Harassed Debtor

If there may be a violation of the Business Practices and Consumer Protection Act, the debtor should do the following:

  • a) find out the name of the collector and/or agency;
  • b) record the exact words or practice followed by the debt collector or the agency; and
  • c) detail the time and dates of the calls or visits.

With the above information the debtor should contact Consumer Protection BC for the name of the complaints manager for the collection agency the debtor is dealing with. This complaints manager will work with the debtor to resolve the complaint, including disciplinary action, if appropriate. Their website is http://www.consumerprotectionbc.ca and includes resources regarding consumer and debtor rights, as well as dispute resolution. It also includes a form for registering a complaint with Consumer Protection BC.

Finally, if the debtor suffered damages or inconvenience as a result of the agency’s collection practices, a Small Claims action may be commenced (s 171, 172).

D. Credit Reporting Agencies

Businesses offering goods or services on credit often rely on credit bureau reports for financial and prior debt information on their customers. See Business Practices and Consumer Protection Act, ss 106-112.

The Business Practices and Consumer Protection Act regulates the activities of the credit bureaus in order to minimize unfair treatment of the party seeking credit. Federal legislation, such as the Personal Information Protection and Electronic Documents Act, SC 2000, c 5 [PIPEDA] and the Privacy Act, RSC 1985, c P-21 also outline the requirements for organizations in their use, collection, and disclosure of personal information in their business practices. Credit information that these bureaus can disclose is the most common type of personal information, and includes one’s:

  • a) name, date of birth and address;
  • b) current and former marital status;
  • c) current and former place of work;
  • d) payment habits; and
  • e) debts owing.

A credit reporting agency cannot give out an individual’s personal credit report without that individual’s consent. When one seeks credit, they will be asked to consent to the lender obtaining a credit report or a credit check. (After consent is given, the lender can obtain a “soft check” periodically meaning they can view the report relating to their loans).

Certain information cannot be included in a credit report, e.g., criminal charges (unless the individual was convicted), convictions more than six years old, and information about race, religion or political affiliation (BPCPA, s 109(1)).

Credit reporting agencies’ records are not always accurate and up to date. The quality and accuracy of the credit information depends on the credit information provided by the credit-granting companies who sign up with the credit reporting agencies. If an individual finds incorrect information on their file, they can report the error to the agency that provided the information to have it corrected. If an individual has proof that their credit report contains an error and they are unable to resolve it with the creditor directly, the individual should contact the credit reporting agencies who are reporting the incorrect information.

The agencies will assist them in finding a resolution. Any individual who is a victim of identity theft should immediately file a police report. The BPCPA allows individuals to provide a 100 word explanation to the reporting agency, which is to be kept and reported with their file (s.111); this may be a useful provision if a business has reported a disputed claim regarding yourself, or if you are a victim of identity theft. Any victim of identity theft is recommended to post a comment on their credit report. This notifies creditors of the fact that the identity theft has taken place, and prevents additional credit being granted without a thorough review by the creditor. It is an offence (punishable by a fine of up to $10,000 or imprisonment for up to 12 months) to knowingly supply false or misleading information to a reporting agency (s 112).

Consumers may obtain their own credit report for free at least once a year by telephoning the credit bureaus directly or completing the form available on their websites Alternatively, a consumer can obtain an instant credit report by using a credit card to pay a one time fee.

There are currently two main credit reporting agencies in Canada, listed below.

Equifax

Toll-free: 1-800-465-7166

Website: http://www.equifax.ca

TransUnion

Toll-free: 1-800-663-9980 (English); 1-877-713-3393 (French)

Website: http://www.transunion.ca

NOTE: Individuals should check their credit history regularly. Industry specialists suggest once per year. Credit reporting agencies will send a person a copy of their credit history by regular mail for free. As each agency operates in a different matter, individuals are encouraged to request their credit history from both agencies, as they will likely be different.
v • d • e
 
Chapters 8-14
Employment Insurance  · Employment Law  · Creditors and Debtors  · Consumer Protection  · Auto Insurance (ICBC)  · Motor Vehicle Law  · Mental Health Law
Chapter Eight:
Employment Insurance
Chapter Nine:
Employment Law
Chapter Ten:
Creditors' Remedies and Debtors' Assistance
Chapter Eleven:
Consumer Protection
Chapter Twelve:
Auto Insurance (ICBC)
Chapter Thirteen:
Motor Vehicle Law
Chapter Fourteen:
Mental Health Law
© Copyright 2023, The Greater Vancouver Law Students' Legal Advice Society.


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