Introduction to Debtors' Options (10:IV)

Being in debt is obviously stressful for debtors. Debtors should be made aware that measures can be taken against overeager creditors. A debtor should not assume that they can ignore their responsibilities because it is unlikely the creditor will initiate legal action. The debtor may try to communicate with the creditor(s) in hopes of reaching an agreement about repayment, and to avoid potentially costly legal battles. However, this is only to be done when the debtor wishes to acknowledge the debt.

Under the recently revised Limitation Act, SBC 2012 c. 13. a creditor cannot succeed in pursuing a debtor after two years from the last payment or acknowledgement of the debt. Communications with creditors that acknowledgethe debt will initiate a new two year time horizon in which a creditor is able to pursue the debtor. This should be carefully considered when a debtor is approaching the end of a two year timeline in which they will be relinquished of legal responsibility for the debt at issue. Since this change to the limitation period, several major creditors have been pursuing debtors through in house collections more aggressively, rather than sending the accounts to third party agencies. The limitation change may also be leading creditors to pursue debtors in court with greater frequency.

Also important to consider is if the matter arose before June 1, 2013, when the revised Limitation Act came into force. If the matter arose before this date, the time period in which a creditor may pursue a debtor is six years rather than two. It is important to determine which limitation period applies before advising a client. To avoid acknowledging a debt, it is important that the following phrase be included in the letter: “This communication is provided solely for the purpose of [state purpose of letter] and does not constitute an acknowledgement of the alleged debt described (above).”

If an acknowledgement of the debt occurs, both the debtor and the creditor must be realistic about the situation. Both parties must assess the costs and delay involved in any litigation. In such negotiations, the latter factors may work in favour of the debtor.

A debtor may wish to seek legal advice before discussing or disputing a debt with a creditor, but this is not always necessary. If the debtor believes they do not owe the debt they should consider legal advice. If the debtor believes they owe the money but disputes the amount claimed, they may also want to consider legal advice. However, if the debtor simply cannot meet the payment terms, it is recommended that they seek credit counselling. See Section IV. Dealing With Debt.

Where a creditor is pressuring a debtor for payment, a student may write a “without prejudice” letter to the creditor explaining your client’s position and/or offering a settlement. See Section III.F: Settlements, below for further information. When writing a Without Prejudice letter it is critical to include the following phrase: “This communication is provided solely for the purpose of [state purpose of letter] and does not constitute an acknowledgement of the alleged debt described above.”

A debtor cannot seek to avoid defending an action in court where that action takes place in another province on the grounds that the court lacks jurisdiction. An action under s 29 of the COEA to enforce an extra-provincial default judgment may proceed where the debtor was served but chose not to offer any defence to the original statement of claim. The creditor simply registers a judgment from another province in B.C., and it becomes a B.C. judgment. Furthermore, as a result of the decisions in Morguard Investments v De Savoye, [1990] 3 SCR 1077 and Beals v Saldanha, [2003] 3 SCR 416, 2003 SCC 72, American and other international default judgments can be easily enforced in B.C. A creditor seeking to register a judgment in B.C. should be aware that only judgments from a reciprocating state can be registered. To determine if a reciprocating agreement exists go to the schedule in the COEA. If there is no reciprocating agreement in place, a creditor can bring an action on the judgment or on the original cause of action.