Collecting Debts in Ontario

If you are owed a debt, it is important that you understand your rights and responsibilities regarding how to properly collect what you are owed. The legislation governing debt collection contains complex stipulations about the requirements for different types of debt, legal collection efforts by creditors, consumer/debtor rights, and the relevant limitation periods.

Debt: A Common Problem

Failing to pay a debt is a common occurrence in Ontario. The inability to pay a debt can occur from financial setbacks such as job loss, underemployment, unexpected expenses (e.g., separation or divorce) and business downturn. However, debt problems can also be the result of poor money-management skills and repayment habits.

If you are the creditor in this situation, meaning you are the one who is owed money, it is important that you keep an open line of communication with your debtor (the person who owes money). This open dialogue will make it much easier to work out a feasible payment plan and schedule. If the communication between the debtor and creditor breaks down, a common result is that the process can become quite adversarial. In some cases, you may choose to assign the debt to a collection agency, in others, you may consider legal action.

 Avoiding Criminal Harassment or Threats

While it is recommended that a creditor keeps an open stream of communication with the debtor, there is a risk that constant contact would be interpreted as criminal harassment. It is important that creditors do not follow or bombard the debtors with constant phone calls and emails. Further, no threats of any kind can be made. This type of behavior can trigger a criminal offence on the part of the creditor. Similarly, it is important that the creditor does not make any statement to the effect of “you must pay me or I will report you and have you prosecuted.” This in itself may constitute the offense of extortion, under s. 346(1) of the Criminal Code of Canada. As a result, the pursuit of debt collection is often best left to legal professionals, in order to make sure that none of the communications to the debtor are illegal.

Seeking a Court Order

If the debtor is not cooperating with you, and you wish to seek a legal a remedy, you may want to go to court to request a judgment against the debtor. A judgment is essentially a court document, signed by a judge, which confirms the particulars of the debt that is payable to you. Note that the amount agreed to on the judgment may even be higher than what you were originally owed, in order to take court costs into account.

If the debt you are owed is $25,000 or less, you would seek to obtain your judgment from the Ontario Small Claims Court. If your claim is for more than $25,000 you may proceed under a more complex and formal procedure governed by the Rules of Civil Procedure.

Enforcing a Judgement

Once you have your judgment in hand, you may then attempt to seize the assets or garnish the wages of your debtor, in order to satisfy the judgment debt. Those are the primary mechanisms for the enforcement of such judgments, and are known as writs of seizure and sale and garnishment. These tools are permit a creditor to invoke the power of the court to take control of assets of the debtor.

In civil court, these remedies are obtained by filing a requisition with the registrar of the court after you have obtained your judgment. The court will then direct an Ontario sheriff to begin seizing and selling real estate and personal property owned by the debtor in order to satisfy the judgment. Interest on the amount that is owed may also be payable to you. These additional steps are required because the judgment is simply an order of the court confirming the amount you are owed. Unfortunately, the judgment is simply the first part of a long process, and is not a guarantee of payment.

Litigation may be a long and expensive process. You ought to be sure that if you get a judgement the debtor has sufficient assets to pay it. It is important to retain competent legal counsel to help create a strong strategy prior to commencing your action.

Child/Spousal Support Debt

If the judgment you were issued from the court is in relation to a support order for debt that is owed to you (either for your child or for yourself), your order is automatically filed with the Ontario Family Responsibility Office (FRO). This office has significant authority to recover your debt and a variety of enforcement tools at their disposal. For example, FRO can issue a support deduction order directly to the debtor’s income source (e.g. their employer) and they can garnish the debtor’s bank account, register a lien against the debtor’s personal property, and report the debtor to credit bureaus.

Statute of Limitations

In Ontario, the Limitation Act governs the timelines for collecting a debt.  If an unsecured debt is not collected or payments are not made after two years, then no legal action can be taken to collect the debt.

Contact Us at Donnell Law Group

If you are owed a debt, regardless of how much or little the amount is, speak with a lawyer to review your situation and advise you on the best recourse available. Our lawyers at Donnell Law Group are experienced in debt collection and we deal regularly with the civil, family and criminal court and the relevant legislation. If hired to represent you, we will fight hard in seeking the justice and equitable result that you deserve. Contact our lawyers for a consultation. We serve Markham, Newmarket, Richmond Hill and all of Southern Ontario.

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