     |
  |
 |
 |
|
|
               |
 |
|
COLLECTING MONEYWhen the economy takes a turn for the worse, many people have problems paying their bills. What legal remedies exist to people who are owed money? A creditor's remedies depend upon the security he holds. For example, lenders often hold security over equipment and other assets. In the event of non-payment, those assets are seized and sold. Sometimes the security takes the form of an assignment of book accounts, which means that the lender can collect the debtor's accounts receivable. If the creditor is a repair shop, it may be able to file a lien against the equipment worked on. I have written previously about the little known and little used Woodworker Lien Act. In the right circumstances, an unpaid woodworker can establish a lien over the timber that he worked on, and have the timber sold in order to obtain payment. Remember, there are some technical requirements to the Act, and the lien proceedings must be instituted within 30 days of the woodworker last performing work in respect of the timber. Many creditors, however, don't have any security available to them. These unsecured creditors have one remedy only: sue. In B.C., there are two different courts to sue in. If the creditor's claim is $10,000 or less, he can use the Small Claims Court. The Small Claims Court is quite user friendly, and creditors and debtors often proceed without lawyers. The other court is the Supreme Court, which has no monetary limit. The proceedings in that Court are far more technical, and a litigant should probably hire a lawyer if proceeding there. (Remember the old saying: he who is his own lawyer has a fool for a client!) Generally, there are two goals to a collection lawsuit. The first goal is to obtain a judgement, which is an order by the court stating that one party owes money to the other. The second goal is to have that judgement paid. To obtain a judgement one must first start a lawsuit, and serve the debtor with the legal papers. If the debtor decides not to defend a lawsuit, judgement can be obtained quite quickly. But, if the debtor does defend the action, it can take months and sometimes years before a judgement is obtained. Once a creditor has a judgement, he must take steps to execute on it. Essentially, the creditor is looking for assets or income of the debtor, not already secured by another creditor, that can be used to pay off the judgement. Execution proceedings can take the form of garnishing monies into court, registering the judgement in the Land Title Office against land held by the debtor, having a sheriff seize and sell assets of the debtor, or forcing the debtor to answer questions under oath about his assets and income. Until a judgement is obtained, however, there is very little that a creditor can do to collect the money that it is owed. Practically, the only pre-judgement remedy available is to garnish monies into court, where those monies will sit until the lawsuit is resolved. A debtor's wages cannot be garnished until after a judgement is obtained and, even then, only a portion of those wages will paid into court. Often a creditor will hold a personal guarantee for the debt that it is owed. For example, if a businessman operates through a limited company, it is common for an equipment supplier or fuel company to demand a personal guarantee from the company president. In that case, any lawsuit would be brought against the company and the guarantor. Suing a debtor for money can be time-consuming, frustrating, costly, and not always successful. It can be difficult, or even impossible, to get blood from a stone. The best advice I can give is to address the problem from the start. If you are lending money or granting credit to somebody, then do a credit check beforehand. If appropriate, take a personal guarantee. Take some security. If you have lien rights, then exercise those. If you are working as a sub-contractor, then get a written commitment from the mill to pay you directly. Remember, this is truly a case where an ounce of prevention is worth a pound of cure. John Drayton is a Kamloops lawyer practicing in the areas of motor transport and forestry law. Back to Articles Index
|
