Have you ever owed someone money? Has someone ever owed money to you?
You may already know this, but there are rules that have to be followed when collecting a debt.
Typically, a “collector” cannot start a lawsuit to recover a debt unless the “debtor” (the person who owes the debt) has been given NOTICE that the collector intends to start a lawsuit (to collect the debt). See section 15 of the Business Practices and Consumer Protection Act.
So, what constitutes “notice”? Well, it is often a demand letter. See Waldron v. Royal Bank (1991), 53 B.C.L.R. (2d) 294 (BCCA).
That’s not the only rule… There are A LOT of other rules that collectors must follow when trying to recover a debt.
For one, a collector cannot HARASS the debtor. But, what does that mean? Well, “harassment” includes:
- using threatening or intimidating language;
- exerting undue or excessive pressure; or
- publishing or threatening to publish a debtor’s failure to pay.
Also, if the collector knows that the debtor has retained a lawyer, then the collector cannot directly contact the debtor (and must contact the lawyer, instead). As you can imagine, this is an added benefit for some debtors…
The Criminal Code also prohibits certain forms of debt collection:
- a collector cannot threaten to cause harm to the debtor or the debtor’s property (section 264.1); and
- a collector cannot convey false messages to the debtor with an intent to alarm or annoy the debtor (section 372).
So, assuming that the creditor does not break the rules when collecting the debt, what are the methods that a collector can use to collect a debt?
One thing that a collector can do is “freeze” the assets of a debtor: this prevents the debtor from disposing/selling the assets (pending the outcome of a lawsuit). This is referred to as a Mareva injunction.
A collector can also garnish (take money from) a debtor’s bank account or wages. There are several rules for doing this and it is usually difficult for a collector to recover a lot of money this way, but it can be done.
Depending on the size of the debt, a collector can also go to court to get an order to sell the debtor’s real estate/property. In addition, a collector can take personal property, such as motor vehicles, household items, work tools, and shares in a company.
With that said, though, a collector cannot take EVERYTHING that a debtor owns. See section 71 of the Court Order Enforcement Act. A debtor is entitled to be “left” with some “basics”, including:
- $4,000 for household furnishings and appliances;
- $2-5,000 for one motor vehicle (depending on the circumstances); and
- $10,000 for tools and other personal property of the debtor that are used by the debtor to earn income from the debtor’s occupation.
As you might have guessed, these “exemptions” are intended to “help out” debtors. But, thankfully, they don’t apply to corporate debtors (i.e. corporations that owe money). For more information, see Court Order Enforcement Exemption Regulation, BC Reg 28/98.
With all this said, here’s my advice: pay your bills. If you don’t, it will end up costing you A LOT more money in the long run.
And now you know.
**The information contained in this column should not be treated by readers as legal advice and should not be relied on without detailed legal counsel being sought.
Originally posted on Castanet.net on April 9, 2013: Give me back my money, now!