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

==== a) Perfection ====

=== 4. Methods of Perfection ===

*i) '''perfection by possession of collateral applies to all forms of security interests (s 24)''';  

*ii) '''perfection by registration'''. Subject to s 19, registration of a financing statement in the Personal Property Registry perfects a security interest in collateral. (s 25); and

*iii) '''temporary perfection''' (See ss 5(3), 7(3), 26, 28(3), 29(4) and 51).

==== c) Consequences of Electing to Proceed Against Collateral ====

==== d) Consequences of Electing to Sue ====

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 notice of 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 within one 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.  

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.

#$2,000 for one motor vehicle if the debtor is a maintenance debtor;  

:'''NOTE: Where there is a conflict between the ''PPSA'' and the ''Land Title Act'', the ''Land Title Act'' prevails (''PPSA'', s 74).'''

==== a) Garnishment Before or After Judgement ====

A garnishee who wishes to dispute indebtedness to the defendant or judgment debtor, should file a dispute notice as soon as possible with the court. If they do not dispute it, a second order, called an order absolute may be issued (see [[Relevant Forms for Creditors%27 Remedies (10:App A) | Appendix A: List of Relevant Documents]]: '''Affidavit in Support of Garnishing Order After Judgment'''). This order operates as a judgment and execution may be taken against him or her. '''Inactivity could render a garnishee liable even if they never owed the money to the defendant/judgment debtor.'''  

Any debt that is “due or accruing due” to a judgment debtor may be garnished by a judgment creditor. This requires that the debt be an existing or perfected debt even though payment is not yet due. Bank accounts can be garnished as long as it is not a joint bank account, except where the debt is owed jointly by the same parties or the creditor is exercising its right of offset. For example, a creditor bank may garnish a debtor’s personal account, including a joint account, to offset the debtor’s debts to that bank where the amounts owed to each joint account holder can be determined. Term deposits may be garnished as long as any conditions on withdrawal are mere matters of procedure and administration, though there may be complications where the account is transferable.

A debtor against whom a garnishing order has been made may apply for a release of the garnishing order, and for an order for the payment of the debt by instalments on the basis of hardship.  This order, if granted (it is rare), will bind the debtor’s creditors, but will only continue for as long as the debtor is not in default on any payment for more than five days, and so long as no other garnishing order is issued against them for any other debt (s 5). There is an exception where a creditor who elects to have a garnishing order changed to payment by instalments will be barred from seeking a garnishing order after the debtor defaults (see ''[https://www.canlii.org/en/bc/bcsc/doc/1984/1984canlii332/1984canlii332.html?autocompleteStr=Bank%20of%20Montreal%20v%20Monsell%20&autocompletePos=1 Bank of Montreal v Monsell'' (1994), 58 BCLR 11 (SC)]). The creditor may apply to have the order  varied if new evidence of the debtor’s finances comes to light.

It is also possible, and sometimes more efficient, to sue on the judgment in the province or country where the judgment debtor’s assets are located.  Normally the foreign court requires a certificate.  To obtain a certificate in BC, creditors must file an application to the court that asks for a certificate to be issued (''COEA'' s 30).

:'''NOTE:''' Builder’s lien issues involve limitation periods and real property registrations and filings. The '''time limitations are extremely  strict'''; solicitors have been known to lose suits because they filed a day late. '''All cases should be referred to a lawyer.''' Refer to: ''Builder’s Lien Act'', SBC 1997, c 45.  

=== 3) Liens on Automobiles, Aircrafts, Boats and Outboard Motors ===

When a buyer has made a partial or full payment to a seller - and the goods are unascertained or future consumer goods, the buyer can place a lien against all goods that are in, or will come into, the possession of the seller that correspond with the description or sample of goods agreed upon (See Part 9 of the ''Sale of Goods Act''). This holds as long as the goods were not sold to someone else. The buyer also has a lien against any bank account where the seller normally deposits  the  proceeds  of  sales.  This  lien  has  priority  over  all  other  security  interests, but generally is not valid in bankruptcy. Generally, provincial liens will only be recognized in bankruptcy if the specific property can be identified. If the seller has maintained records or documents that clearly identify the goods  for which a deposit was paid, the buyer may be entitled to the lien. Where the seller maintains a separate trust account, the buyer can file a property claim for the trust funds which is in priority to other security interests. For examples of the trustee in bankruptcy (of the buyer’s estate) having priority over unpaid sellers, see ''[https://www.canlii.org/en/bc/bcsc/doc/2006/2006bcsc1414/2006bcsc1414.html?autocompleteStr=In%20the%20Bankruptcy%20of%20Ian%20Gregory%20Thow%2C%202006%20BCSC%2C%201414&autocompletePos=1 In the Bankruptcy of Ian Gregory Thow'', 2006 BCSC, 1414] and ''[https://www.canlii.org/en/bc/bcsc/doc/2001/2001bcsc1476/2001bcsc1476.html?autocompleteStr=Anderson%27s%20Engineering%20Ltd%202001%20BCSC%201476&autocompletePos=1 In the Matter of the Bankruptcy of Anderson's Engineering Ltd.'' 2001 BCSC 1476].