Collections, Debts and Accounts Receivables
What is a collections lawyer? Perhaps you are owed money on account of an unpaid invoice for goods that you sold, or services you provided. Perhaps you made a loan to friend so they could have enough money for the down payment on their first house. In either scenario, you fall into one of the oldest forms of law known to our civilization. Back before the days of class action lawsuits, defamation, and securities proceedings, people sued for money that they were owed.
Despite being the oldest form of law – collections law is actually one that has a lot of nuances in order to get cash in hand. Both the principal debtor and guarantors have numerous defences available to them that musts be overcome by the person claiming the existence of a debt. Such defences include the expiry of a limitation period, set-offs, illegality of the interest rate being charged, promissory estoppel, and the existence of a collateral agreement.
Although defences are available, the majority of properly documented collections law cases can be done quickly through a summary trial process. Delay in commencing or prosecuting a case can mean that the debtor’s assets become dwindled or the debtor moves beyond the jurisdiction of the Court and reduces the prospects of getting paid in full.
Even if a judgment is obtained, the Courts do not go out to collect the money on your behalf. A creditor does not want to end up with a judgment that cannot be enforced, and if cash is unavailable to satisfy any judgment or debt instrument, then valuable security must be obtained, and contingencies made to obtain priority in case of any bankruptcy proceeding.
Documentation is key in order to be able to get a quick judgment. Proper evidence surrounding the terms of the debt or the amount of indebtedness, as well as the terms surrounding any interest, liability of guarantors, and the amount, if any, that the debtor is obligated to pay for your legal fees will allow prompt recovery. Securing this documentation is absolutely necessary. Other key pieces of evidence include all payments made along the way, all demands for payment, and any alterations or changes to the original agreement, such as waiving interest and penalties.
For less formal lending arrangements, particularly between friends and family there is often no formal documentation and the underlying transaction has to be proven from circumstantial documents. Despite there not being just one document that sets out the terms, in our experience many individuals will have text messages, facebook messages, e-mails, etc. Bank records showing the withdrawal of money from your account are also very helpful. Bank records should be sceured as typically banks will destroy records after seven (7) years. All other documents should be scanned and backed up to avoid key pieces of evidence becoming lost or destroyed.
If there are literally no documents and the transaction was done in cash you may still be able to prove your case. People often forget that your evidence in the witness box is still evidence. To put it another way, your testimony alone can be sufficient to prove the existence of a debt.
Before proceedings are commenced we also recommend that some form of due diligence is exercised to determine the debtor’s ability to pay. If they have properties in British Columbia under their name that is usually a perfect asset to attach with a judgment. If they are however unemployed, retired, or on disability, it may not make sense to commence a proceeding and it may be time to simply forget about it.
The most important step is to make sure you commence your claim in time and that you do not miss any preliminary steps that may defeat the claim – such as failing to send notice of default.
We regularly act for small to medium size businesses with their accounts receivables department. We can work directly with your in-house team to train them so they can do simple filings, garnishments, and enforcements in Small Claims Court. Training can typically be done in about a half day and we offer continued support and supervision until your staff feel comfortable running simple collections files in Small Claims court, as well as in the Civil Resolution Tribunal.
Some of our larger business clients send us files only when they exceed the Small Claims monetary limits and need to be commenced in Supreme Court, or when enforcement procedures that they have tried themselves have failed. We also ensure that you comply with the legislative requirements for fair debt collection practices in the Business Practices and Consumer Protection Act if the debtor is an individual.
For individuals and smaller businesses we handle all aspects of the collections file, from initial demand to payment hearings and fraudulent conveyances, to final payment. We take steps to secure ahead of time your judgment through pre-judgment garnishment. In cases of fraud or where there are suspicious circumstances where the debtor is moving their assets away we will apply for a Mareva injunction, also commonly referred to as a freezing order and also relief under the Fraudulent Preference Act and the Fraudulent Conveyance Act. Tracing orders and equitable relief such as a constructive trust can also be obtained in appropriate circumstances. If family members of the debtor are assisting in hiding assets there is the prospect to obtain judgment against them in part, or in full.
For debtors with international assets we have a network of lawyers in other jurisdictions that we engage for reciprocal enforcement in the foreign jurisdiction. Finally we assist creditors in bankruptcy and insolvency proceedings, as well as in consumer proposal cases.
We also act for debtors to explore options to satisfy any outstanding debt obligations, and where appropriate consider relief that may lighten the load such as third party proceedings against other responsible parties.
For established business clients with whom we have developed a process for handling accounts receivable files it will usually be as simple as just sending us some standard documents – such as the debtor’s identity and known details about them, as well as the documents to support the debt, such as outstanding invoices. Because of the established relationship we can typically get a new court file made the same week, and if urgent the same day.
For individuals and smaller businesses we will work directly with you to make sure all pertinent documents are preserved and due diligence is done to learn about the debtor’s assets to determine the prospect of success. We take a practical approach and always work towards getting you cash in hand as quickly as possible.
Sometimes the best steps are to wait – such as when a person owes you money and they have only recently bought a house with just a 5% down payment. In such cases, the delay will usually create more equity in the house that can be sold in execution proceedings. Pulling the trigger too early may result in the bank foreclosing on the mortgage and the debtor declaring bankruptcy – which may result in only getting 50 cents on the dollar as opposed to getting paid in full.
For business clients with recurring cases we offer a classic retainer option, where for a flat monthly fee we will do as many or as few cases as you have. This provides cost certainty. We also offer discounts on both our contingency rate as well as our hourly rate. Our clients will always have the option to select either a contingency fee or an hourly fee for each respective file. We also work with our business clients to update the existing terms they have with their purchasers to allow them to claim their full legal fees if they need to proceed to Court.
For individuals and businesses with whom we do not yet have a relationship, we typically charge an hourly rate to exercise due diligence on the debtor, which usually takes between 1 – 2 hours only. If we believe there are sufficient assets which can be sold to realize on the judgment we will offer a contingency rate of 40% if it is within the monetary limit of Small Claims court, and 1/3rd or 33.33% if it needs to proceed in Supreme Court. In addition, if you are successful in Supreme Court you are usually entitled to costs which will offset a substantial amount of your legal costs.
If you already have a judgment we offer the following services on a flat-rate basis:
- Registration of a Judgment against Property located in B.C.
- If the judgment is from either Supreme Court or Provincial Court we charge $200 plus taxes and disbursements.
- If the judgment is from an administrative tribunal our fee is $300 plus taxes and disbursements. Unlike a Supreme Court or Provincial Court judgment, you cannot directly register an administrative tribunal award and must first apply to have it become the equivalent of a Supreme Court judgment.
- For a judgment outside of British Columbia we do not offer a flat fee service because in our experience the registration of the judgment in B.C. will be hotly contested and may result in multiple court appearances and could even result in a multi-day trial.
If your judgment is from Supreme Court, you are entitled to claim costs against the other side for having to register and enforce your judgment. The costs that you are entitled to may actually exceed our fee.
- Cancellation of a registered judgment against Property located in B.C.: $200 plus taxes and disbursements.
- Enforcement of a Judgment by way of a Court Ordered Sale of Property:’
$1,000 plus taxes and disbursements for each uncontested step of the Court Order Enforcement Act process. There are typically five (5) steps before the house is sold – the show cause hearing, the registrar’s reference, assessment of costs, the confirmation hearing, and the sale approval hearing. If any party is evading service, a further application for alternative service will be required.
Typically a party that proceeds through this process will be entitled to an award of costs against the other party which will typically be approximately 40-60% of the legal fees, depending on what stage the file gets resolved.
Contact us either at (604) 259-6200 or using the form below for assistance with Collections, Debts, and Accounts Receivables
The foregoing provides legal information and does not constitute legal advice. As an analogy, legal information are equivalent to learning the rules of chess, and legal advice is the tactics and strategy that goes into winning a game. Lawyers are trained to give valuable advice that is specific to you after learning about the details of your case. Readers are cautioned that they will rarely achieve the best outcome for their case without actual advice. A consultation is often the best next step to take.