Has Someone Failed To Pay You?

Has Someone Failed to Pay You?

The following will outline some basic information for recovering money owed to you under a contract.

The first thing that must be considered is the likelihood of recovering the debt owed.  It is important to remember that just because someone owes you money, it does not mean that they necessarily have the ability to pay you.  It is important to weigh and consider the amount owed to you versus the time and costs of recovery.

The next thing to consider is the limitation period for collecting the debt.  Generally speaking, the limitation period for an action in debt is two years after the claim is discovered.  A claim is discovered when one knew or ought reasonably to have known that injury, loss, or damage had occurred.  If one fails to bring a claim within the limitation period that claim becomes time barred. Note that there is a special rule contained in the Limitation Act as to when a claim on a demand loan is discovered. A demand loan is discovered on the first day there is a failure to perform the obligation after a demand for the performance has been made (s. 14).

Following a determination of the likelihood of recovery and ensuring there is compliance with the limitation period, a demand letter should be sent to the debtor.  This demand letter should outline the name of the creditor, the amount of the debt and the authority of the creditor to collect the debt.  It should also be noted that some contracts provide that a demand has to have been made before any legal action is commenced.

If no payment is received as a result of sending the demand letter it may be advisable to pursue legal action against the debtor.

Before legal action is commenced, one important consideration is which court to sue in.  In BC, there are three different levels of court one can use to recover money owed to them.  The decision as to which court to elect usually comes down to the amount of money the debtor owes.

The three courts are as follows, the Civil Resolution Tribunal (“CRT”), Small Claims Court and Supreme Court.  The CRT has a monetary cap of $5,000, the Small Claims Court has a monetary cap of $35,000 and there is no cap for Supreme Court.

After court election and assuming you are successful and achieve a judgment against the debtor, the method and availability of executing on that judgment is crucial.  It is possible that you go through the entire legal process and receive nothing because the debtor has no exigible property (property that can be realized on).  This is why it is very important at the initial stage to determine whether or not the debtor has the ability to pay.

The common methods of realizing on a judgment for a debt are through seizing and selling the debtors personal property, registering the judgment against the debtor’s real property or through garnishment (a process by which money owed to the debtor gets paid to you instead).

If you would like legal advice with regard to collecting money owed to you, please contact Heath Law LLP at 250-753-2202 or toll free: 1-866-753-2202.