A significant amount of legal actions are claims by creditors against their debtors. If a creditor is lucky, obtaining a judgment is as easy as waiting for a debtor to fail to file a Response to Civil Claim, and quickly taking default judgment. For others, the process might be drawn out further, requiring a summary trial or possibly even a full trial. Obtaining a judgment will usually feel like a victory. Unfortunately, a creditor’s fight is not necessarily over that easily. Outside of foreclosure proceedings, a creditor may discover that enforcing their judgment and recovering the monies owed to them will actually take even longer than obtaining the judgment in the first place. Before commencing a lawsuit, a creditor should think about the likelihood of recovery following a judgment – assuming they even get one - and how much of their resources they are willing to expend on obtaining a judgment and enforcing it. For large financial institutions, this is routine. However, for small businesses or individuals, this might be something completely foreign to them.
One of the first things a creditor will want to do is find out whether a debtor has the ability to pay. If the creditor does not have much information, they can require the debtor to attend at an Examination in Aid of Execution, where a debtor (or often times their lawyer) can ask a debtor about their finances and assets. A creditor can also obtain a court order requiring other persons who may have knowledge of the debtor’s financial circumstances, including a debtor’s spouse. However, an examination may not be practical if the debtor resides far away, because the examination must be held at the registry nearest to where the debtor resides. A second option is a Subpoena to Debtor. This is done in front or a registrar or master, and cannot be issued while a writ of execution is outstanding against a debtor. The usual result is an order for small periodic payments, and is typically a debtor-friendly process.
An Examination in Aid of Execution will usually inform a creditor with respect to the most logical course of action. A debtor might be an employed individual, receiving a biweekly paycheque. A creditor can garnish up to 30 per cent of a debtor’s paycheque, though there are filing fees to deal with, and the debtor’s employer must be served with a new garnishing order each pay period. For debtors earning a modest income, this often means that the net recovery is quite slow (though some of the fees associated with enforcement are recoverable). A creditor can also attempt to garnish the debtor’s bank accounts at any of its known financial institutions.
If a creditor is lucky, the debtor will own real property. For financial institutions who hold a registered mortgage against real property owned by a debtor, they execute against the property through foreclosure proceedings, an option not available to unsecured creditors. An unsecured creditor who seeks to recover monies against real property has to do so via the Court Order Enforcement Act. This can be a time consuming and expensive process, so depending on the amount of the debt owed, and the value of the real property, this may or may not be worth exploring.
Perhaps the debtor has some personal property that can be seized, such as a motor vehicle. The Court Order Enforcement Act provides that various kinds of personal property can be seized. A writ of execution against personal property can be obtained upon application to a court registry. The writ will then be placed with a court bailiff for execution. A seized car or other ‘bit ticket’ item can go a long way to satisfying a debt.
However, creditors should also be cognizant that some debtors may not own any significant assets, and may either be unemployed or earn a low enough salary that garnishing their wages is impractical. It is wise for a creditor to file a Notice of Civil Claim in court within two years to preserve a claim – else run afoul of a limitation period. However, in some instances, the debtor might be ‘judgement proof’, and in those circumstances, it may not be worthwhile for the creditor to attempt to obtain a judgment, as it could mean sinking further financial resources into a claim with no potential recovery. Preferably, these are considerations made before lending money or providing goods or services without advance payment.