Session 3 and 4: Limitations

and Commencement of
Collection Actions
LAW4024: CREDIT AND COLLECTIONS
What is 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.
 It doesn’t deal with debts relating to rent, mortgages, or family law situations.
 If someone owes you money, that person is called a debtor.
 You are called the creditor.
Options to collect on a debt

 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.
 Whatever approach you decide on, you can’t take the debtor’s property — except through
taking legal action
 Nor can you harass the debtor
Layer Fees for Collection

 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.
 Neither collection agencies nor lawyers can guarantee they will recover anything
from the debtor.
Time Limitations

 Refer to the Limitation Act, BC

 The 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, seek legal advice before you sue. If you start a lawsuit
after the deadline, you may have to pay the debtor’s legal costs.
CRT, Small Claims, and Supreme Court

 Depending on the amount owed, you will determine which court will deal with
the matter
 Civil Resolution Tribunal deals with matters involving amounts up to $5000 and
is meant for people to present themselves.
 Small Claims Court deals with matters involving amounts of $5000 - $35,000 and
many people also represent themselves. Small Claims is less expensive and less
risky than going to Supreme Court
 Refer to the Small Claims Act and Small Claims Rules
 Supreme Court deals with matters involving amounts more than $35,000
 Refer to the Supreme Civil Court Rules
Course of Action – Step 1

 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.
 Ensure you are within the limitation period.
Course of Action – Step 2

 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 why the debt hasn’t been paid, if you know
 The information and documents will help you collect the debt.
Course of Action – Step 3

 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.
Course of Action – Step 4

 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.
 A common window of time to give the debtor to make payment arrangements is
seven to 30 days.
Course of Action – Step 5

 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.
 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.
 Begin by filing a Notice of Claim prior to the limitation date and by serving the
debtor appropriately
Small Claims Court

 The Notice of Claim is the key to the lawsuit.

 This documents tells:
 Who you are
 Who you are
 What happened that led to the lawsuit
 What you are asking for
Small Claims Forms and Filing Assistant

 The forms used for Small claim are available online or you can using the Filing
Assistant
 The Filing Assistant will prompt you through a series of questions that will help
you complete the notice of claim form.
 The results of your answers will be put in the form and you can print it and file it
at the registry.
 You could also print the form and complete it manually.
Service

 The next step is to let the defendant know about your claim. You do this by giving
them the defendant's copy of your notice of claim. (This is called "serving" the
notice of claim.) You can do this by registered mail.
 If you don't want to use the mail, you can serve the notice of claim by handing it
to the defendant personally. You can do this yourself or you can have somebody
else do it for you. This might be a friend, who would do it as a favour, or it might
be a professional process server, who would charge a fee.
Reply

 After receiving your notice of claim and address for service forms, the defendant may contact
you directly and offer to pay the claim or try to settle the case in some way.
 You are free to make whatever arrangements you want at any time. Just because you have
filed a notice of claim with the court, does not mean that you must continue with the lawsuit.
 If you are satisfied with what the defendant offers, you should withdraw your claim. If the
defendant offers payments, you could write an agreement as a consent order and file it at the
registry. This can be enforced if payment stops.
 If the defendant files a reply and agrees to pay all or part of the claim, but you don't agree
with how it is to be paid, you can file a payment order and ask for a payment hearing so that
the court can set a payment schedule.
 If the defendant files a reply disputing your claim, the registry will send you a copy of it and
set a date for a settlement conference.
Reply

 The defendant normally has 14 days from the date the notice of claim was served
to file the reply. (A defendant who is served with the notice out of province has 30
days.)
 If the defendant does nothing, you can ask the court to give you a default order,
which is enforceable just like an order made by a judge following a trial.
Settlement Conference
 There are two main purposes for the settlement conference:
 to encourage settlement of cases; and
 if settlement is not possible, to help the parties prepare their cases for trial
 If there is to be a trial, the conference is also an opportunity for you to get some answers to
questions you may have about the preparation of your case. The judge won't give you legal
advice, but you can talk about what evidence you should be prepared to offer at trial. Also,
there are a number of orders the judge can make that can help in the preparation of your case.
 If there is to be a trial, a date may be set immediately. If the date is not set immediately, you
will receive a notice of trial in the mail or by email.
 Trial Conference will be set as well.
Trial

 A trial is a public process where each party tells its own side of the case to a judge
who makes a binding decision. This is a formal procedure.
 If you are the claimant, be prepared to start by telling the judge briefly what the
case is about. Don't forget to mention anything that was agreed at the settlement
conference or after it.
 Evidence is also heard from witnesses.
Small Claims Default Judgement

 Unless the defendant was served outside of British Columbia or the court has otherwise
ordered, a defendant has fourteen full days to file a Reply. This does not include the date the
Notice of Claim was served and the date that the Application for Default Order is filed.
 To apply for a default order, the claimant must file Form 5 and pay a $25.00 fee. A certificate
of service (Form 4) confirming service of the Notice of Claim and blank Reply form must also
be in the file .
 The claimant can ask the court to add the $25.00 fee plus reasonable expenses to the amount
of the default judgment.
Small Claims default judgement

 If the claim is for a specific amount of debt, the registrar will grant a
default order for the amount claimed plus expenses and interest. If the claim is for
anything other than a specific amount of debt, the registrar will schedule
a hearing before a judge. Once a hearing has been set, the defendant cannot file
a Reply without a judge’s permission. If another defendant to the claim has filed
a Reply and a date has been set for either a settlement
conference, trial conference, or trial, the hearing will be held on that date. A
defendant who has not filed a reply is not entitled to notice of the hearing date.
 At a hearing, a default order is not automatic. The claimant must
give evidence and produce documents to prove the amount owing as well as
convince the court that the default order should be granted.