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Script 250 gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For the name of a lawyer to consult, call Lawyer Referral at 604.687.3221 in the lower mainland or 1.800.663.1919 elsewhere in British Columbia.
No one enjoys collecting debts, but sometimes it’s necessary to take decisive action to recover money from someone who owes you it.
First, however, decide whether to proceed at all
In some cases, it may be better to forget about the debt and use greater caution lending money next time. The “do nothing” option may be best where the amount involved is small and your chances of collection are minimal. The effort necessary to collect the debt and enforce payment may not be worth the trouble. Remember that suing and obtaining a judgment doesn’t mean that payment will result – especially if the debtor has no job or assets.
If you want to proceed, what are your options?
You can:
Whatever option you choose, you must know certain things about the debt and the debtor
Who owes you the money – an individual or a company? If the debtor is a company, what’s the proper legal name of the company? If the debtor is an individual, ask yourself if it will be possible to personally deliver any court documents to the debtor. If the person can’t be easily located, you might need the help of a lawyer or collection agent to track the person down and/or to give them notice of any lawsuit against them.
Then try calling the debtor directly on the phone
This is often the best preliminary course of action. Ask what arrangements the debtor intends to make to satisfy the account and avoid court, and then wait for the response. If the debtor agrees to a suitable arrangement, follow it up with a written letter of the arrangement within 24 hours. Then ensure the debtor sticks to the payment schedule.
If that doesn’t work, you may decide to hire a collection agency to “chase” the debtor
Collection agencies can be found in the Yellow Pages of the phone book. They typically charge a percentage of the amount collected (between 25% and 50% isn’t unusual).
Or you may wish to pursue collection on your own
This can be a good idea when the amount involved is small, and the facts obvious and simple. Start by writing a “demand letter” demanding repayment of the debt. In the letter, describe reasonable and practical arrangements for payment, for example, by Visa or MasterCard or by post-dated cheques. Or you may want to propose a meeting to discuss possible options and solutions. At the end of it all, advise the debtor that if satisfactory arrangements aren’t made within a certain period of time (typically seven to 30 days) you’ll be proceeding with a court case, which will include claims for interest and court costs. If your efforts don’t produce the desired result, you may need to go to court.
You can use Small Claims Court if your claim is for $25,000 or less
The maximum limit for Small Claims Court is $25,000. If the debtor owes you more than the maximum $25,000 limit, for example $28,000, you can abandon the excess –in this case, the $3,000 –and simply sue for $25,000 plus some contribution for your “disbursements” or out-of-pocket expenses. Small Claims Court is designed for people who don’t have a lawyer, and there are several courts scattered throughout the province.
For more information on suing in Small Claims Court, see the series of Dial-A-Law scripts on Small Claims Court. Also see the provincial government’s court services website at www.ag.gov.bc.ca/courts/civil/smallclaims.
To collect more than $25,000, you have to sue in Supreme Court
This can be more complicated and expensive than Small Claims Court, and it’s recommended that you hire a lawyer, or at least speak to a lawyer before launching the lawsuit.
Your third option for collecting your debt is to hire a lawyer
A lawyer can often help by preparing the demand letter discussed earlier and sending it to the debtor on the lawyer’s letterhead. This often brings about the desired result.
How much will a lawyer cost?
Lawyers typically charge by the hour. You can expect the legal fees to range from between $150 to $300 an hour. A lawyer may also accept a “contingency fee,” being a percentage of the debt collected. If you contact Lawyer Referral, you can obtain an initial interview with a lawyer who does collection work, and get some general advice and information, for a fee of $25. The number for Lawyer Referral is 604.687.3221 in the Lower Mainland, or 1.800.663.1919 elsewhere in British Columbia.
Gather up all the relevant facts and documents before you meet with the lawyer
You want your interview to be productive. When meeting with the lawyer, be prepared to describe the story about the debt in concise and certain terms. How did the debt arise? What documents are there in support of the debt? What’s the current balance owing? What are the terms for repayment? What information do you have about the debtor’s assets? Having this information in hand will increase the likelihood of your obtaining helpful advice. And the more detective work you perform on your own, the lower the total cost of the collection effort.
You can speak with a lawyer at any stage in the collection proceedings
Even if you began collection efforts on your own, you can obtain legal advice at any stage in the proceedings. But, the sooner the better. Don’t wait until the day before trial before you start asking a lawyer about how to conduct yourself in court. Also, you may have to sue within a specific “limitation period” or period of time, so if you wait too long, you might lose your right to sue.
What about collecting on a judgment?
A number of remedies are available to you, including:
- registering the judgment against land owned by the debtor,
- “garnishing” the debtor’s wages (or taking money owed to the debtor),
- seizing or taking the debtor’s assets by court order using a sheriff or bailiff,
- questioning the debtor under oath about their assets, and
- requiring the debtor to appear before a court official to explain why the judgment hasn’t been paid.
For more information on some of these remedies, refer to scripts 169 on “Getting Your Small Claims Court Judgment Paid” and 251 on “Garnishment.” Legal advice is generally needed for most of these remedies.
Note that there are limits on what you can do to enforce a debt or judgment
Never take the law into your own hand and attempt to take property or “strong arm” a debtor simply because you have a judgment of the court. And you can’t harass anyone at work over a debt. Refer to script 252 on “Harassment by Debt Collectors” to learn more about the law on this.
[updated March 2007]
Dial-A-Law© is a library of legal information that is available:
- by phone, as recorded scripts, and
- in writing, on the CBA BC Branch website.
To access Dial-A-Law, call 604.687.4680 in the lower mainland or 1.800.565.5297 elsewhere in BC. Dial-A-Law is available online at www.cba.org/bc in Public & Media.
The Dial-A-Law library is prepared by lawyers and gives practical information on many areas of law in British Columbia. Dial-A-Law is funded by the Law Foundation of British Columbia and sponsored by the Canadian Bar Association, British Columbia.
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