Collecting on a debt

A debt is something, typically money, that is owed or due. It may arise from a promise to repay an amount of money (for example, a loan), or an agreement to pay for goods or services. This information deals with these kinds of debts. It doesn’t deal with debts relating to rent, mortgages, or family law situations.

If someone owes you money, that person is called a debtor. You are called the creditor. 

To collect on a debt, you can:

• try to collect yourself,

• hire a collection agency, or

• hire a lawyer to collect the debt for you.

Collection agencies typically charge between 25% and 50% of the amount of the debt they recover. 

Lawyers typically charge between $200 and $400 an hour, plus expenses. Some lawyers will work for a “contingency fee” — a percentage of what they recover. So if they don’t recover anything, you don’t have to pay for their services (but you may still have to pay expenses). If you hire a lawyer on a contingency fee, you should get a written contract outlining what you will have to pay, and when.

Neither collection agencies nor lawyers can guarantee they will recover anything from the debtor.

Whatever approach you decide on, you can’t take the debtor’s property — except through legal action (see our guidance on repossessing property). 

Nor can you harass the debtor. For example, you can’t put unreasonable pressure on them to pay. This is explained further in our guidance on dealing with debt collectors.

The law in BC creates a basic limitation period of two years for starting a legal action. A lawsuit can’t be brought more than two years after the “claim is discovered.” In the case of a debt, if a debtor hasn’t made a payment — or acknowledged they owe the debt — in more than two years, the creditor may be barred from bringing legal action to collect. 

If the time limit is fast approaching for a debt owed to you, and you want to keep your right to collect, you should start legal action as soon as possible. If you aren’t sure about the time limit, get legal advice before you sue. If you start a lawsuit after the deadline, you may have to pay the debtor’s legal costs.

No one enjoys collecting debts. First, you should decide whether to proceed at all. If the debt is small, or if the debtor is bankrupt or unlikely to repay anything, it may cost you more time and money to collect than the debt is worth.

Gather information and documents relating to the debt. These include:

• the name and contact information of the debtor and any other person or company responsible for paying the debt

• how and when the debt arose

• the ability of the debtor to pay

• the reason the debt hasn’t been paid, if you know

The information and documents will help you collect the debt.

Reach out to the debtor by phone, email, or text. Remind the debtor of the debt and ask what they can do to pay. If the debtor agrees to start on a payment schedule, put the agreement in writing. Get them to date and sign it. 

A demand letter is a letter insisting that the debt be paid. You may want to offer practical payment options that are acceptable to you, including payment by credit card or post-dated cheques. You can use our demand letter template, if you’d like a place to start. 

The letter can’t threaten to take improper action to collect the debt. It’s perfectly appropriate to say you’re considering legal action. You might end your letter saying something like: 

“I intend to take legal action to collect the debt, plus interest and costs of the legal proceedings, if you don’t make satisfactory payment arrangements within [a certain window of time].” 

A common time window to give the debtor to arrange payments is seven to 30 days. 

If the debtor still doesn’t pay, you may want to bring a legal action. 

You can sue in British Columbia if the debt arose in BC, or if the debtor lives or carries on business in BC. 

Just starting a lawsuit will sometimes make the debtor pay. As well, after starting the action, you may be able to collect from the debtor’s employer and others who owe money to the debtor. (See our guidance on garnishment.)

The amount you’re seeking affects the choice of court to sue in.

If you are seeking up to $5,000, you can file a claim with the Civil Resolution Tribunal. The tribunal is an online system designed for people to represent themselves.

For amounts between $5,000 and $35,000, you’d sue in Small Claims Court. Many people represent themselves in this court. It’s less expensive and less risky than going to Supreme Court. If the debtor owes you more than $35,000, you can sue in Small Claims Court for up to $35,000 and forget the rest. 

For amounts over $35,000, you would sue in BC Supreme Court.

If you win in court and get a judgment for the debtor to pay you, you may have several ways to collect the money:

• You can question the debtor under oath about their income, assets, and ability to pay.

• You can seize (that is, take) the debtor’s assets with a court order using a bailiff. 

• You can register the judgment against land the debtor owns.

• You can garnish the debtor’s wages or other money owed to the debtor.

If someone hasn’t paid back money you lent them, you should seek legal advice. There are options for free or low-cost legal help.