Collecting a Debt

Initial Steps

If you are owed money and the debtor has refused to pay or won’t respond to your requests for payment, you can attempt collecting your debt through the Courts of Ontario. A court judgment may convince the debtor to pay or you may be able to collect by enforcing the judgment.

Before suing, you should consider the amount owing. A small debt may not be worth starting a lawsuit. If the debt is not an exact sum, it may not be considered a “debt” at law and may be more complicated to prove and collect. For example, a claim based on an injury to you or damage to your property is not a “debt” at law.

Demand Payment from a Debtor in Writing

You should demand payment from the debtor in writing. There is no magic to the exact words you should use. Set out the amount owing and demand payment by a certain date. You should warn the debtor that you intend to sue if the money is not paid. If you are unsure of what to write, you can contact us for more information on how to write a demand letter to a debtor.

Limitation Period

Most debts in Ontario are governed by a two-year limitation period. With some exceptions, you can’t get judgment for a debt unless you started the lawsuit within two years of the date the amount became due and payable. The limitation period may be extended if the debtor makes a partial payment or acknowledges the debt in writing, unless the initial limitation period has already expired.

Suing in Court

If your demand does not lead to payment, you can pursue the debt in the Ontario Superior Court of Justice.

If the debt is $50,000 or less, you can file your lawsuit in the Small Claims Court division of the Superior Court of Justice. Small Claims Court is generally easier to navigate for non-lawyers compared to claims in Civil court. You can start a claim in Small Claims Court by filing a Plaintiff’s Claim and serving it on the debtor.

Claims for a debts over $50,000 must be filed with the Civil division of the Superior Court. A simplified procedure applies to claims for $200,000 or less. You can start a Civil claim by filing a Statement of Claim and serving it on the debtor.

Default Judgement

If the debtor is served in Ontario, they have 20 days to file a statement of defence from the date claim was served on them. If the debtor fails to file a defence, you can request the court clerk to note the debtor in default.

Once the debtor is noted in default, you can request a default judgment using a Requisition for Default Judgment from in the Civil Division or the Default Judgment form in Small Claims Court. Both forms require information about the principal debt, interest, pre-judgment interest, and costs.

A noting in default or default judgment can generally be set aside if the debtor acts promptly, provides an explanation for its delay, and shows evidence to support a defence to the claim.

Enforcing Judgement 

Once you have obtained a judgment, there are several ways to recoup the debt if the debtor does not pay voluntarily.

To gather information, you can conduct an examination of the debtor to ask questions about the debtor’s assets and finances. You can also conduct personal property registry and land titles searches to determine whether the debtor has assets in Ontario.

You can attempt to collect the money owed to you by garnishing the debtor’s bank account or garnishing money owed to the debtor by an employee or other third party. To do so, you must file the forms applicable in either the Civil division or Small Claims Court of the Superior Court of Justice. There are limits on how much money can be taken from a debtor’s wages or jointly held bank accounts. For more information, see the Garnishment page of this website.

If the debtor has assets in Ontario, you can obtain a writ of seizure and sale and file it with the sheriff in the applicable region. A key benefit of filing the writ of seizure and sale (or writ of seizure and sale of land in Small Claims Court) with the sheriff is that it will encumber any land that the debtor owns or acquires in that region.

You can then direct the sheriff to seize and sell the debtor’s personal property or land, although the sheriff cannot sell the property until the required notice is provided to the debtor and the sale is properly advertised.   

Garnishment notices and writs of seizure are valid for six years but can be renewed before they expire.

Final Thoughts

In conclusion, it is important to be aware of how to deal with debtors before you begin to take action towards collecting a debt. Further, the Courts of Ontario can be an effective method for collecting a debt. Both the Civil division and Small Claims Court of the Superior Court of Justice provide methods for enforcing and collecting debts. If pursued diligently and used effectively, those methods can assist businesses seeking to collect debts. If the debt is large, it is preferable to enlist the services of a lawyer.