Difference between revisions of "Creditors' Remedies against Debtors (10:III)"

A creditor initiates legal proceedings for one obvious and specific purpose: to permit that creditor to obtain a judgment and collect the debt  owed. There may be cases where such action is not taken, for example, if the debtor has no assets and is not likely to ever have assets. There are also instances where a creditor may be legally prevented from initiating proceedings against a debtor, for example, if the debtor files an assignment in bankruptcy. These issues will be discovered when the debtor’s assets, if any, are identified at a Payment Hearing in Small Claims Court, or in the Examination in Aid of Execution or Subpoena to Debtor Hearing in Supreme Court (see Appendix B: Checklist for Examination in Aid of Execution). However, when a debtor has or may have assets, the creditor may wish to obtain a judgment on the debt to execute against assets of the debtor.  

1.The Creditor A ssistance A ct Before this Act, the common law position was that priorities among execution creditors were determined in relation to the time the writs were filed. The creditor who filed the first writ would be paid in full, and then the next, and so on.The principles of the Creditor Assistance Act allow creditors to give debtors time to pay, and not prejudice the patient creditor over another who files as soon as the debt is due. Section 3 provides that on execution, all creditors who have filed a writ will receive their share on a pro rata (or “rateable”) basis. Pro rata means that each creditor will receive a share of the funds available for distribution that is proportionate to their share of the debtor’ s total debt. Exceptions to this principle of pro rata distribution allow preference to sheriff’ s costs, costs to the creditor at whose instance the seizure and levy was made, and wage claims that do not exceed three month’ s wages, or salary. Further, the Family Maintenance Enforcement Act, RSBC 1996, c 127 provides that proceeds realized on execution  under that Act are not subject to distribution under the Creditor Assistance Act. In addition, some statutory liens and charges may take priority over the rateable distribution under the Act. NOTE: Payments made pursuant to a foreclosure sale of land will be made in the order that judgments are registered at the Land Title Office, and not on a pro rata basis. a)Money to be Levied by Execution Under s 3, once the sheriff collects money, an event called a levy, the persons who qualify under the Act distribute it. These persons must  have filed a writ of execution prior to the levy or must file a writ within one month of the date the levy was entered. Where the creditor does not have a judgment against the debtor at the time of levy, and the claim is for debt, the creditor may obtain a certificate of claim under  the Creditor Assistance Act. If this certificate is delivered to the sheriff withinone month of the levy, the creditor may participate in the rateable distribution. The procedure for the certificate of claim is in ss 6 – 21 of the Act. b)Contest of the Creditor’s Claim Under s 14, on receiving an affidavit of claim the execution debtor may file and serve an affidavit of good defense to the claim within 10  days of the original service. The court may vary this length of time upon application. The distribution is halted pending verification of the validity of the claim. Besides the debtor, another creditor may contest the claim (s 15). Grounds for filing include an allegation that there is no debt due in good faith from the debtor to the claimant, or an allegation that the claim is not one of debt as required by s 6 of the Creditor Assistance Act. A claimant whose claim is contested must make an application to the Supreme Court of British Columbia within eight days of being notified; otherwise, the claim will be deemed to have been abandoned.