Difference between revisions of "Collecting on a Debt"

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{{Dial-A-Law Blurb}}
{{REVIEWEDPLS | reviewer = [https://www.peopleslawschool.ca/lawyer/robert-rogers Robert Rogers], Hamilton Duncan, and [http://www.robertslaw.ca/ Adam Roberts], Barrister & Solicitor|date= January 2020}} {{Dial-A-Law TOC|expanded = money}}
 
No one enjoys it when they’re owed money and don’t get paid. Learn the options available to you when collecting on a debt, and the steps to deal with problems.
{{Dial-A-Law TOC|expanded = credit}}
No one enjoys it when they’re owed money and don’t get paid. Learn the options available to you when collecting on a debt, and the steps to deal with the situation.  
   
   
==Understand your legal options==
==What you should know==


===What is a debt===
===You have options to collect on a debt===
A '''debt''' is something, typically money, that is owed or due. It may arise from a promise to repay an amount of money (for example, a loan), or an agreement to pay for goods or services. This information deals with these kinds of debts. It doesn’t deal with debts relating to rent, mortgages, or family law situations.
To collect on a debt, you can:


If someone owes you money, that person is called a '''debtor'''. You are called the '''creditor'''.
* try to collect yourself
* hire a collection agency
* hire a lawyer to collect the debt for you


===You have options to collect on a debt===
Collection agencies typically charge between 25% and 50% of the amount of the debt they recover.
To collect on a debt, you can:
*try to collect yourself,
*hire a collection agency, or
*hire a lawyer to collect the debt for you.


Collection agencies typically charge between 25% and 50% of the amount of the debt they recover.  
Lawyers generally charge a flat hourly rate. But they may also work for a “contingency fee.” This means they get a percentage of whatever they recover. So if they don’t collect anything, you don’t pay. But you may still be on the hook for any expenses.


Lawyers typically charge between $200 and $400 an hour, plus expenses. Some lawyers will work for a '''contingency fee''' — a percentage of what they recover. So if they don’t recover anything, you don’t have to pay for their services, but you may still have to pay expenses. If you hire a lawyer on a contingency fee, you should get a written contract outlining what you will have to pay, and when.
===You can’t take the debtor’s property===
Whatever approach you decide on, you can’t take the debtor’s property — except through legal action. If you sue the debtor and get a judgment in your favour, you may be able to take their property as repayment. We explain this elsewhere. [https://www.peopleslawschool.ca/creditor-repossess-property/ See our information on repossessing property].


Neither collection agencies nor lawyers can guarantee they will recover anything from the debtor.
Nor can you harass the debtor. For example, you can’t use threatening, profane, or intimidating language. We cover this in some detail in our information on debt collectors. [https://www.peopleslawschool.ca/dealing-debt-collectors/ Here's a link to that information].


===You can’t take the debtor’s property===  
===There’s a time limit to sue to collect a debt===
Whatever approach you decide on, you can’t take the debtor’s property — except through taking legal action (this is explained below). Nor can you harass the debtor; see our information on [[Harassment by Debt Collectors (Script 252)|harassment by debt collectors (no. 252)]] for more on this topic.
In BC, there’s a basic '''limitation period''' of two years for starting a legal action. You can’t start a lawsuit more than two years after the claim is “discovered.” If the debtor hasn’t made a payment or acknowledged the debt in more than two years, you may be too late to collect.


===There is a time limit to sue to collect a debt===
If the time limit is approaching on a debt owed to you, consider starting legal action right away. That way, you’ll keep your right to collect. If you aren’t sure about the time limit, consider getting legal advice.
The [http://canlii.ca/t/8qx3 law in BC] creates a basic '''limitation period''' of two years for starting a legal action. A lawsuit cannot be brought more than two years after the “claim is discovered”. In the case of a debt, if a debtor hasn’t made a payment — or acknowledged they owe a debt — in more than two years, the creditor may be barred from bringing legal action to collect.  


If the time limit is coming up soon for a debt owed to you, and you want to keep your right to collect, you should start legal action as soon as possible. If you are not sure about the time limit, [[Low Cost and Free Legal Services (Script 430)|get legal advice]] before you sue. If you start a lawsuit after the deadline, you may have to pay the debtor’s legal costs.
==Work out the problem==


==Deal with the problem==
If you run into problems collecting on a debt, there are steps you can take.


===Step 1. Decide on a course of action===
===Step 1. Decide on a course of action===
No one enjoys collecting debts. First, you should decide whether to proceed at all. If the debt is small, or if the debtor is bankrupt or unlikely to repay anything, it may cost you more time and money to collect than the debt is worth.
 
Collecting debts can be a pain. As a first step, ask yourself if it’s worth the effort. For example, maybe the debt is very small. Or the debtor is unlikely to be able to repay anything. In either case, it may cost you more time and money to collect than the debt is worth.


===Step 2. Collect information on the debt===
===Step 2. Collect information on the debt===
You should gather information and documents relating to the debt. These include:
You should gather information and documents relating to the debt. These include:
*the name and contact information of the debtor and any other person or company responsible for paying the debt
 
*how and when the debt arose
* the name and contact information of the debtor and any other person or company responsible for paying the debt
*the ability of the debtor to pay
* how and when the debt arose
*the reason why the debt hasn’t been paid, if you know
* the ability of the debtor to pay
* the reason the debt hasn’t been paid, if you know


The information and documents will help you collect the debt.
The information and documents will help you collect the debt.


===Step 3. Contact the debtor===  
===Step 3. Contact the debtor===
Reach out to the debtor by phoning, emailing or texting them. Remind the debtor of the debt and ask what they can do to pay the debt. If the debtor agrees to pay based on a payment schedule, put the agreement in writing. Get them to date and sign it.  
 
Reach out to the debtor by phone, email or text. Remind them of the debt and ask what they can do to pay it. If the debtor agrees to pay based on a payment schedule, put the agreement in writing. Get them to date and sign it.


===Step 4. Send a demand letter===
===Step 4. Send a demand letter===
A '''demand letter''' is a letter demanding payment of the debt. You may want to offer practical payment options that are acceptable to you, including payment by credit card or post-dated cheques.


The letter can’t threaten to take improper action to collect the debt. It is perfectly appropriate to say you are considering legal action. You might end your letter saying something like:
A '''demand letter''' is a letter insisting on payment. In it, you can offer payment options that are acceptable to you. For example, payment by credit card or e-transfer.
:“I intend to take legal action to collect the debt, plus interest and costs of the legal proceedings, if you don’t make satisfactory payment arrangements within [a certain window of time].”


A common window of time to give the debtor to make payment arrangements is seven to 30 days.
Your letter can’t threaten to take improper action to collect. But you can say you’re considering legal action. You can also give the debtor a time window to make payment arrangements (for example, 30 days).


===Step 5. Consider legal action===
A template is always a good place to start. [https://www.peopleslawschool.ca/letter-loan-demand/ We have a loan demand letter template].
If the debtor does not pay, you may want to bring a legal action.  


You can sue in British Columbia if the debt arose in BC, or if the debtor lives or carries on business in BC.  
===Step 5. Consider legal action===


Just starting a lawsuit will sometimes make the debtor pay. As well, after starting the action, you may be able to collect money from the debtor’s employer and others who owe money to the debtor. See our information on [[Garnishment (Script 251)|garnishment (no. 251)]].
If the debtor doesn’t pay, you may want to bring a legal action. You can sue in British Columbia if the debt arose in BC, or if the debtor lives or carries on business in BC.


The amount you are seeking affects the choice of court you would sue in.
Just starting a lawsuit will sometimes make the debtor pay. As well, after starting the action, you may be able to collect from the debtor’s employer and others who owe money to the debtor. We explain the concept of “garnishment” elsewhere. [https://www.peopleslawschool.ca/creditor-garnish-wages-or-bank/ See our information on garnishment].


If you are seeking '''up to $5,000''', you can file a claim with the [https://civilresolutionbc.ca/ Civil Resolution Tribunal]. The tribunal is an online system designed for people to represent themselves.
If the amount you’re trying to collect is less than $5,000, you can bring your claim to the Civil Resolution Tribunal. This is an online system designed for people to bring claims on their own. If your claim is between $5,000 and $35,000, you’d sue in Small Claims Court.


For amounts '''between $5,000 and $35,000''', you would sue in [http://www.provincialcourt.bc.ca/types-of-cases/small-claims-matters Small Claims Court]. Many people represent themselves in this court. It’s less expensive and less risky than going to Supreme Court. If the debtor owes you more than $35,000, you can sue in Small Claims Court for up to $35,000 and forget the rest. See our information on [[Suing Someone in Small Claims Court (Script 166)|Small Claims Court]] (no. [[Suing Someone in Small Claims Court (Script 166)|166]] to [[Going to Trial in Small Claims Court (Script 168)|168]]).
For amounts over $35,000 you'd sue in BC Supreme Court. You can also sue in Small Claims Court for up to $35,000 and forget the rest.


For amounts '''over $35,000''', you would sue in [https://www.supremecourtbc.ca/ BC Supreme Court].
==Who can help==
===Legal advice===
There are options for free legal advice.


==Common questions==
:'''Lawyer Referral Service'''
:Helps you connect with a lawyer for a complimentary 15-minute consult to see if you want to hire them.
:Call 1-800-663-1919
:[https://www.accessprobono.ca/our-programs/lawyer-referral-service Visit website]


===What happens if I get a court judgment?===
:'''Access Pro Bono's Free Legal Advice'''
If you win in court and get a judgment for the debtor to pay you, you may have several ways to collect the money:
:Volunteer lawyers provide 30 minutes of free legal advice to people with low or modest income.
*You can question the debtor under oath about their income, assets and ability to pay.
:Call 1-877-762-6664
*You can seize (that is, take) the debtor’s assets with a court order using a bailiff.
:[https://www.accessprobono.ca/get-legal-help Visit website]
*You can register the judgment against land the debtor owns.
*You can garnish the debtor’s wages or other money owed to the debtor.


See our information on [[Getting Your Judgment Paid (Script 169)|getting your judgment paid (no. 169)]]. 
:'''People’s Law School'''
 
:See more options for free or low-cost legal help.
 
:[https://www.peopleslawschool.ca/options-legal-help/ Visit website]
 
[updated October 2017]
 
'''The above was last reviewed for legal accuracy by [https://www.peopleslawschool.ca/lawyer/robert-rogers Robert Rogers], Hamilton Duncan, and [http://www.robertslaw.ca/ Adam Roberts], Barrister & Solicitor.'''
 
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Latest revision as of 00:57, 7 November 2023

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by Robert Rogers, Hamilton Duncan, and Adam Roberts, Barrister & Solicitor in January 2020.
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No one enjoys it when they’re owed money and don’t get paid. Learn the options available to you when collecting on a debt, and the steps to deal with problems.

What you should know

You have options to collect on a debt

To collect on a debt, you can:

  • try to collect yourself
  • hire a collection agency
  • hire a lawyer to collect the debt for you

Collection agencies typically charge between 25% and 50% of the amount of the debt they recover.

Lawyers generally charge a flat hourly rate. But they may also work for a “contingency fee.” This means they get a percentage of whatever they recover. So if they don’t collect anything, you don’t pay. But you may still be on the hook for any expenses.

You can’t take the debtor’s property

Whatever approach you decide on, you can’t take the debtor’s property — except through legal action. If you sue the debtor and get a judgment in your favour, you may be able to take their property as repayment. We explain this elsewhere. See our information on repossessing property.

Nor can you harass the debtor. For example, you can’t use threatening, profane, or intimidating language. We cover this in some detail in our information on debt collectors. Here's a link to that information.

There’s a time limit to sue to collect a debt

In BC, there’s a basic limitation period of two years for starting a legal action. You can’t start a lawsuit more than two years after the claim is “discovered.” If the debtor hasn’t made a payment or acknowledged the debt in more than two years, you may be too late to collect.

If the time limit is approaching on a debt owed to you, consider starting legal action right away. That way, you’ll keep your right to collect. If you aren’t sure about the time limit, consider getting legal advice.

Work out the problem

If you run into problems collecting on a debt, there are steps you can take.

Step 1. Decide on a course of action

Collecting debts can be a pain. As a first step, ask yourself if it’s worth the effort. For example, maybe the debt is very small. Or the debtor is unlikely to be able to repay anything. In either case, it may cost you more time and money to collect than the debt is worth.

Step 2. Collect information on the debt

You should gather information and documents relating to the debt. These include:

  • the name and contact information of the debtor and any other person or company responsible for paying the debt
  • how and when the debt arose
  • the ability of the debtor to pay
  • the reason the debt hasn’t been paid, if you know

The information and documents will help you collect the debt.

Step 3. Contact the debtor

Reach out to the debtor by phone, email or text. Remind them of the debt and ask what they can do to pay it. If the debtor agrees to pay based on a payment schedule, put the agreement in writing. Get them to date and sign it.

Step 4. Send a demand letter

A demand letter is a letter insisting on payment. In it, you can offer payment options that are acceptable to you. For example, payment by credit card or e-transfer.

Your letter can’t threaten to take improper action to collect. But you can say you’re considering legal action. You can also give the debtor a time window to make payment arrangements (for example, 30 days).

A template is always a good place to start. We have a loan demand letter template.

Step 5. Consider legal action

If the debtor doesn’t pay, you may want to bring a legal action. You can sue in British Columbia if the debt arose in BC, or if the debtor lives or carries on business in BC.

Just starting a lawsuit will sometimes make the debtor pay. As well, after starting the action, you may be able to collect from the debtor’s employer and others who owe money to the debtor. We explain the concept of “garnishment” elsewhere. See our information on garnishment.

If the amount you’re trying to collect is less than $5,000, you can bring your claim to the Civil Resolution Tribunal. This is an online system designed for people to bring claims on their own. If your claim is between $5,000 and $35,000, you’d sue in Small Claims Court.

For amounts over $35,000 you'd sue in BC Supreme Court. You can also sue in Small Claims Court for up to $35,000 and forget the rest.

Who can help

Legal advice

There are options for free legal advice.

Lawyer Referral Service
Helps you connect with a lawyer for a complimentary 15-minute consult to see if you want to hire them.
Call 1-800-663-1919
Visit website
Access Pro Bono's Free Legal Advice
Volunteer lawyers provide 30 minutes of free legal advice to people with low or modest income.
Call 1-877-762-6664
Visit website
People’s Law School
See more options for free or low-cost legal help.
Visit website
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