Collecting Those Outstanding Debts
Credit has become an integral part of our day to day lives. Most of the time loans and credit are repaid in a timely fashion. However, when debtors fail to meet their financial obligations, creditors must resort to a variety of methods to collect.
Self-help remedies
Depending on the type of creditor, there are a number of self-help remedies that are reasonably quick, cost efficient and do not require going to court. For instance, a creditor with a registered security interest under the Personal Property Security Act, can seize and sell the debtor’s collateral. If the creditor is a commercial landlord and the debt is unpaid rent, the tenant’s assets can be seized.
Going to court to collect
If the above remedies are not feasible, then the next step may be to sue the debtor. If this is the decision, the creditor should consider enlisting legal assistance. Although it means spending more money in the short term, if you are successful, then some of these costs may be recoverable, once there is a judgement in your favour.
In order to help the lawyer save time and your money, the creditor should provide all relevant documents and information as well as a brief summary of the facts. A lawyer can help you decide whether the account is worth pursuing or whether it would simply be throwing good money after bad.
Once the lawyer is familiar with the case, a demand letter will probably be sent to the debtor. Even though the creditor has probably tried this, sometimes seeing the demand on law firm letterhead motivates the debtor to settle. There are a variety of ways to structure and secure the settlement and once again a lawyer can provide valuable assistance.
If a settlement is not forthcoming, a statement of claim will be issued. In a large percentage of these cases, the creditor gets a default judgement. In other words, the debtor does not defend the claim, there is no trial and the creditor gets a judgement.
Enforcing a judgement
Although the court gives the creditor the legal authority to recover what is owing, the creditor and not the court is responsible for actually collecting on the judgement. Assuming the debtor remains uncooperative the creditor must take a proactive approach to enforcing the judgement. There are a number of available options, including a writ of seizure and sale, garnishment and an examination in aid of execution.
A writ of seizure and sale is an order to enforce an order for payment of money. It directs the sheriff to, not surprisingly, seize and sell enough of the debtor’s property to pay the judgement.
A garnishment order is served on someone, the garnishee, who either owes or is holding money for the debtor. It directs the garnishee to pay the money directly to the creditor. The two most common examples of garnishees are employers and banks.
An examination in aid of execution is a process that allows you the chance to question the debtor and/or other people, who know the debtor, in order to find out what means the debtor has for settling the judgement.
Collection can be one of the most frustrating parts of business. However, if you remain vigilant and have good collection policies, delinquent debtors should remain few and far between. If you would like further information please contact Jerry Birenbaum, Craig Colraine or Clio Godkewitsch.
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