Overview of collection procedures
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This factsheet is about collecting debts after a Small Claims Court has made a decision that one person owes another person money. It gives information from the point of view of the person trying to collect and the person who must pay.
First there are some words that should be defined.
A “PAYMENT ORDER” is a court Order requiring money be paid. A Payment Order is sometimes called a Judgment. A Payment Order can be made because a Defendant failed to file a Reply, or attend a Settlement Conference or trial. It can also be made after a Settlement Conference or trial where a Judge has heard all the facts of the case. A Payment Order is effective for 10 years. If the amount owed has not been paid by then, there is a way of obtaining a new Payment Order and having an additional 10 years to collect.
A “DEBT” is the amount required to be paid by the Payment Order.
A “DEBTOR” under the Small Claims Rules is someone required to pay money because a Payment Order has been made against them.
A “CREDITOR” is someone a Payment Order requires a Debtor to pay money to.
COLLECTING DEBTS FROM THE CREDITOR’S POINT OF VIEW
When you think about it, there are only a few ways to make someone pay money they owe:
- You could have them pay voluntarily. For example, the Debtor could be written a letter requesting payment by a particular date to a particular address.
- You could have a Judge order them to pay the money all at once or by installments and have a way of punishing them if they do not pay.
- You could take things they own and sell them.
- You could take money owed to them by someone else, like their employer.
- You could prevent them from dealing with land they own or indeed take land they own to pay the debt.
PAYMENT HEARINGS AND PAYMENT SCHEDULES
After a Payment Order is made a Judge or Registrar can conduct a Payment Hearing. Sometimes a Payment Hearing is held immediately after a trial or Settlement Conference. Sometimes a special date has to be set. The Judge at a Payment Hearing can:
- Order a date when the debt must be paid; or
- Make an installment order including the dates and amounts of installments; or
- Refuse to make an order in which case the whole debt is immediately payable.
In addition to the possibility of a Payment Schedule being ordered, Payment Hearings are useful because a Creditor can get from the Debtor information useful for other collection procedures. For example, a Creditor can find out the name of the Debtor’s employer, where the Debtor banks, and what assets the Debtor owns.
For details about Payment Hearings see Factsheet 16 which is called “Payment Hearings.”
A Debtor who fails to comply with a Payment Schedule can be subject to two forms of punishment. First, the Creditor will be free to use other forms of collecting like seizing assets and garnishment (described below). Second, the Debtor can be made to attend a Default Hearing. If the Debtor’s explanation, or failure to give an explanation, of why the Payment Schedule has not been complied with is considered by the Judge to amount to a contempt of Court, the Debtor can be jailed for up to 20 days — and the debt is still owed by the Debtor to the Creditor.
For more information about Default Hearings see Factsheet 17 which is called “Default Hearings.”
If a Payment Schedule has not been made or is no longer in force a Creditor can get an Order of Seizure and Sale. This order allows a Bailiff to seize items owned by the Debtor. But there are some restrictions. Some of the Debtor’s assets are exempt from seizure including:
- $4000 of the Debtor’s household furnishings and appliances;
- One motor vehicle worth up to $5000; and
- Tools and other personal property of the Debtor that are used by the Debtor to earn an income from the Debtor’s occupation.
The Bailiff can not break into a house to seize items. And items owned by the Debtor jointly with someone else won’t be seized. In addition, the Creditor must first pay the Bailiff for the cost of the Bailiff’s service.
If items are seized the Bailiff will sell them at auction or by another reasonable method. If enough money is obtained by the sale the Creditor will be reimbursed for the cost of seizure, plus the amount owed on the debt.
For more information about seizing assets see Factsheet 18 which is called “Seizing Assets.”
GARNISHING WAGES AND OTHER MONEY OWED TO THE DEBTOR
If money is owed to the Debtor by an employer or other person, a Creditor can get an Order requiring the money owing to the Debtor be paid instead to the Small Claims Court registry. This procedure is called Garnishment and the Order is called a Garnishing Order. Money in a bank account can be garnished because the bank really “owes” the money to the Debtor. The procedure to get a Garnishing Order is described in Factsheet 19 which is called “Garnishing Orders.”
REGISTERING A CERTIFICATE OF JUDGMENT AGAINST LAND
Registering a Certificate of Judgment against land owned by a Debtor prevents the Debtor from selling or mortgaging the land unless the debt owed to the Creditor is paid off. Even if the Debtor owns land jointly with another person, it may be useful to register a Certificate of Judgment against the land.
A Certificate of Judgment can be obtained at the Small Claims Court Registry from the Registrar. The cost is $30.00. The Certificate of Judgment can then be registered at the Land Title Office where the land is registered. The cost of filing is $25.00. A Certificate is effective for two years, after which a new Certificate must be obtained and filed.
A search can be done at a Land Titles Office. There are four in BC and they are located in Kamloops, Prince George, Victoria and New Westminster. A search can also be done using the BC OnLine computer system to find out if the Debtor owns land. There is a fee for doing the search.
HAVING LAND OWNED BY THE DEBTOR SOLD TO PAY OFF THE DEBT
In some cases it is possible to obtain an Order to have the Debtor’s land sold. However, if the land is used by the Debtor as a principal residence in the Capital Regional District or the Greater Vancouver Regional District, and the Debtor’s equity in the land is less than $12000 the land is exempt from being taken and sold. If the land is located elsewhere in BC and is used by the Debtor as a principal residence and the Debtor’s equity is less than $9000 the land is exempt from being taken and sold.
The process of having a Debtor’s land sold to pay off a debt owed to a Creditor is very complicated, costly and time-consuming. Legal advice should be obtained to determine whether it would be financially worthwhile.
DRIVER’S LICENCE SUSPENSION
If the Payment Order was for a lawsuit for bodily injuries or damages to property worth more than $400 arising from a motor vehicle accident, a Creditor can apply to the Superintendent of Motor Vehicles to have the Debtor prohibited from driving. Section 91 of the Motor Vehicle Act applies to this situation. The Superintendent must be supplied with a Certificate of Judgment, evidence of identity of the Debtor, and evidence of the Debtor’s failure to satisfy the Payment Order.
For more information contact RoadSafety BC.
SOME OPTIONS FOR THE DEBTOR WHO CANNOT AFFORD TO PAY
Although a Payment Order has been made, a Debtor may not be financially able to pay the debt. The law provides some protections for Debtors. These include:
- the right to request a Payment Hearing and a Payment Schedule;
- the right to apply to the Court (see Factsheet 16) to arrange a Payment Schedule;
- the right to be free from garnishment, seizure, or other collection procedures as long as the payments required by the Payment Schedule are made on time;
- the right to have some of the Debtor’s assets free from seizure;
- the right in most cases to keep 70% of one’s wages free from garnishment and to apply to increase the exemption up to 90% (see Factsheet 20, which is called “Setting Aside Garnishing Orders”);
- the right to apply to have garnishing orders released (see Factsheet 20);
- the right under Part 7, Division 1 of the Business Practices and Consumer Protection Act to be protected from unacceptable collection practices by professional debt collectors;
- the right to seek protection under the Bankruptcy and Insolvency Act. For more information contact a Chartered Accountant who is a Trustee in Bankruptcy. You can find a Trustee by searching online.
FOR MORE INFORMATION
More information about these rights may be obtained by visiting Cosumer Protection BC online.
You can speak with a lawyer for up to 30 minutes for a fee of $25 by obtaining a referral through the Lawyer Referral Service (1-800-663-1919).
You could also contact a Legal Services Society Office or a Community Law Office.
Prepared by Glenn Gallins
Revised April 2008, links checked 2019
Funded by the PLE Program of the Legal Services Society