Collecting Monies You Are Owed in Tough Economic Times

Greg Harney
Originally published in
Business Vancouver Island - May 2009
by Greg Harney

Back in law school, they label this area of the law "creditors' remedies".

Graduating in 1982, and commencing work in those depressed economic times provided fantastic training with respect to conceiving or utilizing creative remedies to collect monies that clients are owed for outstanding obligations of all variety.

Often, the debtor will not have the means to pay the creditor.

Too often, creditors do not understand the array of remedies available to collect monies owed, or to at least secure their position sufficiently to recover those monies when the economy improves, the value of assets increases, or perhaps cash flow in various businesses returns to the pre-distress levels.

The analysis of your options begins with the nature of the debt.

If it is a simple debt related to a contract, in the ordinary course the creditor can commence legal action for debt if the debtor refuses or is unable to pay. While the justice system can sometimes be cumbersome, particularly in the small claims venue governing claims of less than $25,000.00, there are ways in which to speed the action through to judgment more efficiently.

For instance, an application for summary judgment can put pressure on the debtor that will either allow you to obtain your judgment or perhaps to negotiate some current payment as well as better security over time.

If you simply have a claim for debt, you generally are an unsecured creditor, and it is preferable to attempt to convert that status to a secured creditor so that in the event of bankruptcy you might have some protection against the tangible asset.

If you have supplied services or materials to a property, you may be able to claim a lien or certificate of pending litigation encumbering the property.

If you are a secured creditor, you have been granted a charge over personal or real property securing your claim against the equity in that property. Even if there is no equity in that property, the value of the property can increase and your secured charge can then attach the increase in equity in the property. It is always desirable to get security against property rather than having an unsecured claim for debt or even an unsecured judgment.

Bringing pressure to bear on the debtor before other creditors can allow you to lawfully achieve payment or certain advantages rather than being the last in the queue.

Many creditors will already know that taking a judgment does not guarantee payment.

However, a judgment can be registered against the debtor and its property. A judgment lasts initially for ten years, but is renewable on multiple occasions. Often, judgment may be valueless during depressed economic times, but acquire value over time as the value of the debtor and the property increases. It is possible to register the judgment without being a secured creditor, which may in fact achieve a comparable result.

If the debtor refuses or neglects to accommodate, it is important to understand through your counsel or directly the creative remedies that may be employed to recover payment in these times of economic duress.