|
Is it worth trying to collect your debt?
You cannot harass the debtor
Get the facts about the debt and the debtor
How can a collection agency help?
What about sending a “demand letter”?
When can you use Small Claims Court?
When do you have to use Supreme Court?
How can a lawyer help?
How do you collect your money if the judge decides in your favour?
Is it worth trying to collect your debt?
No one enjoys chasing after unpaid debts but sometimes it’s necessary to take action to recover money from someone who owes it to you. But first, you should decide whether to proceed at all.
Consider doing nothing
In some cases, it may be better to forget about the debt and to be more careful in lending money next time. The do-nothing option may be best where the amount involved is small and your chances of collection are minimal. Your efforts may not be worth the trouble. Remember that suing doesn’t mean that you will get paid, especially if the person who owes you money (the debtor) has no job or belongings (assets) and doesn’t have the ability to pay you.
If you decide to go ahead, what are your options?
You can:
- try to collect yourself
- hire a collection agency
- hire a lawyer to help you
You cannot harass the debtor
While you have a right to attempt to collect your debt, you should not harass the debtors by showing up at their home or workplace or by calling their friends or family members. Also, you should not call them at their workplaces unless you have no other way of reaching them. If you do so in a harassing way, your debtor may take legal action against you.
Get the facts about the debt and the debtor
Whatever option you choose, there are some things you should learn in advance. 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 collection agent to track the person down and/or to give them notice of any lawsuit against them.
Start by calling the debtor directly on the phone
This is often the best preliminary course of action. Ask what plans the debtor has to pay the debt and avoid court, and then wait for the response. If the debtor agrees to a suitable payment plan, follow it up with a written letter within 24 hours describing the payment plan. Then make sure the debtor sticks to the payment plan.
How can a collection agency help?
If phoning the debtor doesn’t work, you may decide to hire a collection agency to go after 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).
What about sending a “demand letter”?
Trying to collect a debt yourself 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, propose a reasonable and practical payment plan, 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, let the debtor know that if he or she doesn’t agree to a satisfactory payment plan within a certain period of time (typically seven to 30 days), you’ll be proceeding with a court case, which will include your claims for interest and court costs.
If your efforts don’t work, you may need to go to court.
When can you use Small Claims Court?
You can use Small Claims Court if the debt you 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 located throughout the province.
For more information on suing in Small Claims Court, see the series of Dial-A-Law scripts on Small Claims Court available at: www.cba.org/bc/public_media/small/165.aspx. Also see the provincial government’s Small Claims Court website at: www.ag.gov.bc.ca/courts/small_claims/index.htm.
When do you have to use Supreme Court?
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 you should probably hire a lawyer, or at least speak to a lawyer before launching the lawsuit.
How can a lawyer help?
Your third option for collecting your debt is to hire a lawyer. A lawyer can often help by preparing the demand letter we discussed earlier and sending it to the debtor on the lawyer’s letterhead. This often results in a payment.
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.” A contingency fee is a percentage of the debt you collect. For example, if the court awards you $50,000, the lawyer may charge you 30% or $16,500.
If you contact Lawyer Referral, you can obtain an initial interview with a lawyer who does debt collection work, and get some general advice and information for a fee of $25 plus taxes for the first 30 minutes. The number for Lawyer Referral is 604.687.3221 in the Lower Mainland, or 1.800.663.1919 elsewhere in British Columbia.
How should you prepare for meeting with a lawyer?
Gather up all the relevant facts and documents before you meet with the lawyer. You want to get the most out of your interview. When meeting with the lawyer, be prepared to describe the story about the debt in clear and certain terms. For example:
- How did the debt come about?
- What documents do you have that support your claim?
- How much are you owed?
- What is the repayment plan, if any?
- What information do you have about the debtor’s assets?
If you have this information in hand at your interview with the lawyer, you will increase the likelihood of obtaining helpful advice. And the more homework you do by yourself, the less you will pay in your efforts to collect your debt.
You can speak with a lawyer at any stage in the proceedings
Even if you began collection efforts on your own, you can get legal advice at any stage in the process. 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.
How do you collect your money if the judge decides in your favour?
If the judge rules in your favour, the debtor may simply pay up. But sometimes the debtor just ignores the judge. In this case, you may have to go back to court and ask the judge to do something to force the debtor to pay you.
The judge can force the debtor to pay the debt in several ways. He or she can:
- register the judgment against land owned by the debtor. Once the judgment is registered against the debtor’s property, anyone who buys the property takes on the debt.
- garnish or take money) from the debtor’s salary.
- authorize a court official to seize the debtor’s property.
- question the debtor under oath about his or her assets.
- require the debtor to appear before a court official to explain why he or she hasn’t paid the debt.
Remember: You cannot harass the debtor
Remember that there are limits on what you can do to enforce a debt or judgment. Never take the law into your own hands and attempt to take property or “strong arm” a debtor simply because the judge has ruled in your favour. And you can’t harass anyone at work over a debt. Sometimes it may be better to forget about the debt and to be more careful when lending money next time.
Many thanks to the Credit Counselling Society for reviewing this document. |