Difference between revisions of "Collecting on a Debt"

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{{Dial-A-Law Blurb}}
{{REVIEWEDPLS | reviewer = [https://www.peopleslawschool.ca/lawyer/robert-rogers Robert Rogers], Hamilton Duncan, and [http://www.robertslaw.ca/ Adam Roberts], Barrister & Solicitor|date= January 2020}} {{Dial-A-Law TOC|expanded = money}}
No one enjoys it when they’re owed money and don’t get paid. Learn the options available to you when collecting on a debt, and the steps to deal with problems.
==What you should know==


{{Dial-A-Law TOC|expanded = credit}}
===You have options to collect on a debt===
==What is a debt?==
To collect on a debt, you can:
A debt is something that someone owes someone else. For example, if someone owes you money, that is a debt. You are the creditor. The person who owes you the money is the debtor. A debt is an obligation that a debtor owes to a creditor. It may be for an agreement to repay a fixed amount of money (for example, a loan) or an agreement to pay for goods or services. This script deals with these kinds of debts. It doesn’t deal with other types of debts, for example, relating to landlord and tenant obligations, family law situations, and mortgages.


==Is it worth trying to collect your debt?==
* try to collect yourself
No one enjoys collecting debts, but sometimes you must act quickly to recover money owed to you. First, you should decide whether to proceed at all. If the debt is small, or if the debtor is bankrupt or unlikely to repay anything, it may cost you more time and money to collect than the debt is worth.
* hire a collection agency
* hire a lawyer to collect the debt for you


==If you want to collect, what are your options?==
Collection agencies typically charge between 25% and 50% of the amount of the debt they recover.
You can:
*hire a collection agency.
*try to collect yourself.
*hire a lawyer to collect the debt for you.


==You cannot harass the debtor==
Lawyers generally charge a flat hourly rate. But they may also work for a “contingency fee.” This means they get a percentage of whatever they recover. So if they don’t collect anything, you don’t pay. But you may still be on the hook for any expenses.
Whatever you decide, you can’t take the debtor’s property (except through proper legal proceedings), and you can’t harass the debtor. Check script [[Harassment by Debt Collectors (Script 252)|252]] on “Harassment by Debt Collectors” for more on this.


==How much will a collection agency or lawyer cost?==
===You can’t take the debtor’s property===
Collection agencies often charge between 25% and 50% of the amount they recover. Lawyers often charge between $200 and $500 an hour, plus expenses. Some lawyers will work for a contingency fee—a percentage of what they recover. So if they don’t recover anything, you don’t have to pay for their services, but you may still have to pay expenses. If you hire a lawyer for a contingency fee, you should get a written contract outlining what you will have to pay, and when.
Whatever approach you decide on, you can’t take the debtor’s property — except through legal action. If you sue the debtor and get a judgment in your favour, you may be able to take their property as repayment. We explain this elsewhere. [https://www.peopleslawschool.ca/creditor-repossess-property/ See our information on repossessing property].


Neither collection agencies nor lawyers can guarantee that they will recover anything.
Nor can you harass the debtor. For example, you can’t use threatening, profane, or intimidating language. We cover this in some detail in our information on debt collectors. [https://www.peopleslawschool.ca/dealing-debt-collectors/ Here's a link to that information].


You can consult a lawyer through the Canadian Bar Association’s [http://www.cbabc.org/For-the-Public/Lawyer-Referral-Service Lawyer Referral Service]. A consultation for up to 30 minutes is $25 plus tax. That can help you decide what to do.
===There’s a time limit to sue to collect a debt===
In BC, there’s a basic '''limitation period''' of two years for starting a legal action. You can’t start a lawsuit more than two years after the claim is “discovered.” If the debtor hasn’t made a payment or acknowledged the debt in more than two years, you may be too late to collect.


==Two-year time limit to sue==
If the time limit is approaching on a debt owed to you, consider starting legal action right away. That way, you’ll keep your right to collect. If you aren’t sure about the time limit, consider getting legal advice.
A two-year limit applies to most debts that become due after June 1, 2013. If you don’t sue within 2 years, you’ll likely lose your right to collect the debt. There may be a longer time limit for some debts that became due before June 1, 2013. If the time limit is coming up soon for a debt owed to you, and you want to keep your right to collect, you should start to sue as soon as possible. If you are not sure about the time limit, get legal advice before you sue. Because if you start a lawsuit after the deadline, you may have to pay the debtor’s legal costs.
 
==Work out the problem==
 
If you run into problems collecting on a debt, there are steps you can take.
 
===Step 1. Decide on a course of action===
 
Collecting debts can be a pain. As a first step, ask yourself if it’s worth the effort. For example, maybe the debt is very small. Or the debtor is unlikely to be able to repay anything. In either case, it may cost you more time and money to collect than the debt is worth.
 
===Step 2. Collect information on the debt===


==Gather the facts and the evidence==
You should gather information and documents relating to the debt. These include:
You should gather information and documents relating to the debt. These include:
*the name and contact information of the debtor and any other person or company responsible for paying the debt.
 
*how and when the debt arose.
* the name and contact information of the debtor and any other person or company responsible for paying the debt
*the ability of the debtor to pay.
* how and when the debt arose
*the reason why the debt hasn’t been paid, if you know.
* the ability of the debtor to pay
* the reason the debt hasn’t been paid, if you know


The information and documents will help you collect the debt.
The information and documents will help you collect the debt.


==Start by contacting the debtor yourself==
===Step 3. Contact the debtor===
A phone call, an email, or a text is often the best first step. Remind the debtor of the debt and ask what they can do to pay the debt and avoid a lawsuit. If the debtor agrees to pay based on a payment schedule, get them to date and sign a written agreement or letter confirming this. But any discussions with the debtor don’t usually extend the 2-year time limit to start a lawsuit. It still applies.
 
Reach out to the debtor by phone, email or text. Remind them of the debt and ask what they can do to pay it. If the debtor agrees to pay based on a payment schedule, put the agreement in writing. Get them to date and sign it.


==Sending a demand letter may help==
===Step 4. Send a demand letter===
A demand letter is a letter demanding payment of the debt. You may want to offer practical payment options that you will accept, including payment by credit card or post-dated cheques. The letter can’t threaten to take improper action to collect the debt. But you should end your letter by saying that you “reserve the right to take legal proceedings” or “intend to take legal proceedings” to collect the debt, plus interest and costs of the legal proceedings, if the debtor doesn’t make satisfactory payment arrangements within a certain time (typically 7 to 30 days).


==What if you want to sue?==
A '''demand letter''' is a letter insisting on payment. In it, you can offer payment options that are acceptable to you. For example, payment by credit card or e-transfer.
If the debtor does not pay, you may want to sue. You can do that if the debt arose in BC, or if the debtor lives, or carries on business, in BC. Depending on the amount you are seeking (explained below) you sue in '''small claims court''' or '''BC supreme court'''. Courthouses for small claims court and supreme court are located throughout BC. If you are seeking up to $5,000, you should file a claim with the [https://civilresolutionbc.ca/ Civil Resolution Tribunal].


Just starting to sue will sometimes make the debtor pay. And once you start to sue, you may be able to collect the debt from the debtor’s employer and others who owe money to the debtor, using garnishment proceedings. Script [[Garnishment (Script 251)|251]] has more on this.
Your letter can’t threaten to take improper action to collect. But you can say you’re considering legal action. You can also give the debtor a time window to make payment arrangements (for example, 30 days).


==When to use small claims court and the Civil Resolution Tribunal==
A template is always a good place to start. [https://www.peopleslawschool.ca/letter-loan-demand/ We have a loan demand letter template].
For amounts between $5,001 and $35,000, use [http://www.provincialcourt.bc.ca/types-of-cases/small-claims-matters small claims court]. You don’t have to use a lawyer in small claims court. And it’s less expensive and less risky than going to supreme court. If the debtor owes you more than $35,000, you can sue for the maximum $35,000 and forget the rest.


You start a small claims court lawsuit by filing a notice of claim at the right small claims court registry, often the registry closest to where the debtor lives or carries on business. The loser in small claims court must usually pay limited legal expenses to the winner. For more information on suing in small claims court, check the [http://www.cbabc.org/For-the-Public/Dial-A-Law/Scripts/Small-Claims-Court Dial-A-Law scripts on small claims court].
===Step 5. Consider legal action===


For amounts up to $5,000, use the [https://civilresolutionbc.ca/ Civil Resolution Tribunal]. It uses an online claim system. Its website has more information. You don’t have to use a lawyer with the tribunal.
If the debtor doesn’t pay, you may want to bring a legal action. You can sue in British Columbia if the debt arose in BC, or if the debtor lives or carries on business in BC.


==When to use supreme court==
Just starting a lawsuit will sometimes make the debtor pay. As well, after starting the action, you may be able to collect from the debtor’s employer and others who owe money to the debtor. We explain the concept of “garnishment” elsewhere. [https://www.peopleslawschool.ca/creditor-garnish-wages-or-bank/ See our information on garnishment].
For amounts over $35,000, use [http://www.courts.gov.bc.ca/supreme_court/ BC Supreme Court]. This is more complicated and expensive than small claims court, and you should hire a lawyer, or speak to a lawyer before starting the lawsuit. For more information, check the [http://www.courts.gov.bc.ca/supreme_court/self-represented_litigants Supreme Court website for self-represented litigants].


==What happens after you get a court judgment?==
If the amount you’re trying to collect is less than $5,000, you can bring your claim to the Civil Resolution Tribunal. This is an online system designed for people to bring claims on their own. If your claim is between $5,000 and $35,000, you’d sue in Small Claims Court.
If you win in court and get a judgment for the debtor to pay you, you may have several ways to collect the money:
*question the debtor under oath about their income, assets and ability to pay.
*seize or take the debtor’s assets by court order using a bailiff.
*register the judgment against land the debtor owns.
*garnish the debtor’s wages or money owed to the debtor.


Script [[Getting Your Judgment Paid (Script 169)|169]] has more on getting your judgment paid. So does the provincial government website called ''[http://www2.gov.bc.ca/gov/content/justice/courthouse-services/small-claims/how-to-guides/getting-results Getting Results]''.
For amounts over $35,000 you'd sue in BC Supreme Court. You can also sue in Small Claims Court for up to $35,000 and forget the rest.


==Who can help==
===Legal advice===
There are options for free legal advice.


:'''Lawyer Referral Service'''
:Helps you connect with a lawyer for a complimentary 15-minute consult to see if you want to hire them.
:Call 1-800-663-1919
:[https://www.accessprobono.ca/our-programs/lawyer-referral-service Visit website]


[updated October 2017]
:'''Access Pro Bono's Free Legal Advice'''
:Volunteer lawyers provide 30 minutes of free legal advice to people with low or modest income.
:Call 1-877-762-6664
:[https://www.accessprobono.ca/get-legal-help Visit website]


'''The above was last reviewed for accuracy by Robert Rogers and Barry Promislow, and edited by John Blois.'''
:'''People’s Law School'''
----
:See more options for free or low-cost legal help.
:[https://www.peopleslawschool.ca/options-legal-help/ Visit website]


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Latest revision as of 00:57, 7 November 2023

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by Robert Rogers, Hamilton Duncan, and Adam Roberts, Barrister & Solicitor in January 2020.
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No one enjoys it when they’re owed money and don’t get paid. Learn the options available to you when collecting on a debt, and the steps to deal with problems.

What you should know

You have options to collect on a debt

To collect on a debt, you can:

  • try to collect yourself
  • hire a collection agency
  • hire a lawyer to collect the debt for you

Collection agencies typically charge between 25% and 50% of the amount of the debt they recover.

Lawyers generally charge a flat hourly rate. But they may also work for a “contingency fee.” This means they get a percentage of whatever they recover. So if they don’t collect anything, you don’t pay. But you may still be on the hook for any expenses.

You can’t take the debtor’s property

Whatever approach you decide on, you can’t take the debtor’s property — except through legal action. If you sue the debtor and get a judgment in your favour, you may be able to take their property as repayment. We explain this elsewhere. See our information on repossessing property.

Nor can you harass the debtor. For example, you can’t use threatening, profane, or intimidating language. We cover this in some detail in our information on debt collectors. Here's a link to that information.

There’s a time limit to sue to collect a debt

In BC, there’s a basic limitation period of two years for starting a legal action. You can’t start a lawsuit more than two years after the claim is “discovered.” If the debtor hasn’t made a payment or acknowledged the debt in more than two years, you may be too late to collect.

If the time limit is approaching on a debt owed to you, consider starting legal action right away. That way, you’ll keep your right to collect. If you aren’t sure about the time limit, consider getting legal advice.

Work out the problem

If you run into problems collecting on a debt, there are steps you can take.

Step 1. Decide on a course of action

Collecting debts can be a pain. As a first step, ask yourself if it’s worth the effort. For example, maybe the debt is very small. Or the debtor is unlikely to be able to repay anything. In either case, it may cost you more time and money to collect than the debt is worth.

Step 2. Collect information on the debt

You should gather information and documents relating to the debt. These include:

  • the name and contact information of the debtor and any other person or company responsible for paying the debt
  • how and when the debt arose
  • the ability of the debtor to pay
  • the reason the debt hasn’t been paid, if you know

The information and documents will help you collect the debt.

Step 3. Contact the debtor

Reach out to the debtor by phone, email or text. Remind them of the debt and ask what they can do to pay it. If the debtor agrees to pay based on a payment schedule, put the agreement in writing. Get them to date and sign it.

Step 4. Send a demand letter

A demand letter is a letter insisting on payment. In it, you can offer payment options that are acceptable to you. For example, payment by credit card or e-transfer.

Your letter can’t threaten to take improper action to collect. But you can say you’re considering legal action. You can also give the debtor a time window to make payment arrangements (for example, 30 days).

A template is always a good place to start. We have a loan demand letter template.

Step 5. Consider legal action

If the debtor doesn’t pay, you may want to bring a legal action. You can sue in British Columbia if the debt arose in BC, or if the debtor lives or carries on business in BC.

Just starting a lawsuit will sometimes make the debtor pay. As well, after starting the action, you may be able to collect from the debtor’s employer and others who owe money to the debtor. We explain the concept of “garnishment” elsewhere. See our information on garnishment.

If the amount you’re trying to collect is less than $5,000, you can bring your claim to the Civil Resolution Tribunal. This is an online system designed for people to bring claims on their own. If your claim is between $5,000 and $35,000, you’d sue in Small Claims Court.

For amounts over $35,000 you'd sue in BC Supreme Court. You can also sue in Small Claims Court for up to $35,000 and forget the rest.

Who can help

Legal advice

There are options for free legal advice.

Lawyer Referral Service
Helps you connect with a lawyer for a complimentary 15-minute consult to see if you want to hire them.
Call 1-800-663-1919
Visit website
Access Pro Bono's Free Legal Advice
Volunteer lawyers provide 30 minutes of free legal advice to people with low or modest income.
Call 1-877-762-6664
Visit website
People’s Law School
See more options for free or low-cost legal help.
Visit website
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