Getting judgment against a customer who will not pay is usually straightforward. Collecting it is the part that costs money. Decide early whether the debtor has anything worth chasing, because that single question should drive every decision that follows.
Our charges include applicable taxes. Disbursements are extra and billed at cost — itemized upfront, in writing, never hidden.
From $450.87 taxes included
Search the debtor. You need the exact legal name, the corporate status, a valid address for service, and any real property in their name. Suing "Bob's Roofing" when the contract was with a numbered company, or suing a corporation that has been dissolved, wastes the filing fee and the months that follow it.
Reconcile the account and assemble the file: the contract or terms of sale, purchase orders, delivery records, the invoices, and any email in which the debtor acknowledged the balance or promised to pay. Then send a demand letter with the total, the basis, and a hard deadline. A meaningful share of accounts settle on that letter alone.
Check the clock. The basic limitation period is two years. But under the Limitations Act, 2002 a written acknowledgment of the debt, or a part payment, generally restarts the two years from the date of that acknowledgment. That $500 the customer paid last spring may be the most valuable document in the file.
You can only charge the interest your contract or terms of sale allow. Under section 4 of the federal Interest Act, where interest is expressed at a rate for a period shorter than a year — the classic "2% per month" on an invoice — and the contract does not state the equivalent yearly rate, nothing above five per cent per year is chargeable or recoverable. Fix your invoice template today. It is a five-minute change worth thousands.
If no rate was agreed, prejudgment interest applies under the Courts of Justice Act at the rate prescribed for the quarter in which the proceeding was commenced, and postjudgment interest runs on the judgment until it is paid.
Administrative charges, restocking fees, collection charges and legal costs can only be added where your terms provide for them, and even then a court may decline to enforce a charge it considers unreasonable. If you want them, put them in your terms of sale and make sure the customer agreed to those terms before the goods went out.
Claims of $50,000 or less go to Small Claims Court. Claims capped at $200,000 or less go into the Superior Court's simplified procedure. Debt files are the easiest kind to prove, and default judgment is common, because defendants who genuinely have no money frequently do not file a defence at all.
You are not a collection agency when you collect debts owed to your own business — Ontario's licensing regime is aimed at third parties collecting on behalf of others. Agencies are cheap up front and work on contingency, but they cannot sue. If the debtor is refusing rather than unable, court is the faster route.
Watch for the file that is not really a collection file. Once the customer says the work was defective or incomplete, you have a contract dispute with a counterclaim attached, and it needs to be run as one. Recognise that at the start rather than at the settlement conference.
Start with an examination in aid of execution. The debtor attends under oath, produces financial records, and answers questions about income, assets, and what has been transferred to whom. It is the cheapest step and it tells you whether the rest is worth doing.
Then the tools: garnishment of bank accounts, of receivables owed to the debtor by its own customers, and of wages within statutory limits; a writ of seizure and sale filed with the sheriff in each county where the debtor owns land; and seizure of personal property, which is usually uneconomic. Writs often sit quietly for years and then pay out in full when the debtor sells or refinances.
Prevention costs less than any of this. Written credit terms stating an annual interest rate, a personal guarantee from the principal of a small corporate customer, and a PPSA registration where you supply goods on credit. A guarantee is what turns an empty numbered company into a defendant with a house.
Generally two years from when the debt became due and you knew you had a claim. A written acknowledgment of the debt or a part payment within that window usually restarts the two-year period from the date of the acknowledgment, so a payment plan the customer defaulted on may have bought you more time than you think.
Not necessarily. A dissolved Ontario corporation can in many cases be revived, which restores it as a defendant. Depending on the facts there may also be a claim against directors, against whoever received the corporation's assets, or against a personal guarantor. Get the corporate profile before you write the debt off.
Only if your contract also states the equivalent annual rate. Section 4 of the federal Interest Act limits recovery to five per cent per year where interest is expressed for a period under a year without stating the yearly equivalent. Spell out both figures in your terms and the full rate is recoverable.
An agency is inexpensive and works on a percentage, but it can only ask. A lawyer or paralegal can issue a claim, obtain judgment and enforce it. For a debtor who is avoiding you rather than genuinely broke, court is usually faster. For a large ledger of small accounts, an agency first and court for the stubborn ones is the sensible order.
Then proceedings against them stop. You file a proof of claim with the trustee and take your place with the other unsecured creditors, which usually means recovering little or nothing. This is the argument for taking security or a guarantee at the outset rather than after the account goes bad.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.