You have obtained judgment for damages and/or costs in a legal action and are now facing the next stage in the process—how to collect the money owed. There are a variety of strategies for collecting a judgment but in all circumstances the vital first step is to determine what assets of the judgment debtor you can attach or have sold to satisfy your court order. Uncovering reliable information about the assets of a judgment debtor significantly increases a creditor’s chances of collecting a court judgment.
Assets that are exempt from collection
One of the factors to consider is that certain assets of an individual judgment debtor may be exempt from collection. There are prescribed exemptions respecting the personal property of debtors in the Court Order Enforcement Exemptions Regulation that limit what can be seized, including:
• $4,000 for household furnishings and appliances
• $5,000 for one motor vehicle
• $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.”
There are additional exemptions for equity in real estate owned by an individual judgment debtor, namely: $12,000 if “the debtor is a person whose principal residence is located within the boundaries of the Capital Regional District or the Greater Vancouver Regional District” and$9,000 if the principal residence is outside those areas.
Other assets may also be subject to limitations on collection, including registered savings plans and certain investments governed by the Insurance Act. For more information on these, please refer to our earlier article, “Collecting Money From Debtor's RRSP”.
Personal property and land title registries
The Personal Property Registry (PPR) lists the property of a judgment debtor which is encumbered by a security interest. Secured creditors must register their claims against assets and such filings can be obtained from the PPR. A PPR search shows assets owned by a judgment creditor and the claims that other creditors have against those assets. As the holder of a court judgment a plaintiff is usually an unsecured creditor and so is only entitled to collect against the residual value of assets owned by a judgment debtor (because they are subject to the priority claims of secured creditors).
Searching the Land Title Registry (LTO) will also indicate whether a judgment debtor has any interest in any real property. LTO title searches also show charges such as mortgages or judgments registered against real property.
Unfortunately, certain claims against a judgment debtor’s assets may rank in higher priority to a judgment debt and may not be disclosed on either the PPR or the LTO registries. For example, creditors making claims pursuant to certain statutes such as the Income Tax (Canada) Act or Employment Standards Act may in certain circumstances have priority over unsecured judgment creditors.
Examinations in Aid of Execution and Payment Hearings
These procedures allow for judgment debtors to be examined under oath about their income, employment status, liabilities, and the net value of their assets. In the course of these proceedings, a judgment debtor can be ordered to provide documentary evidence such as employment records, income tax returns or bank statements.
Examinations In Aid of Execution are governed by the Supreme Court Civil Rules and take place with a court reporter. Such an examination can be followed by a Subpoena to Debtor appearance which takes place before a Registrar [the Rules seem to use the title, “Examiner” with a Registrar being one who can be an Examiner]. Payment Hearings are governed by the Provincial (Small Claims) Court Rules, and take place before a judge.
The significant advantage of either a Subpoena to Debtor or a Payment Hearing is that a court may make an order requiring a judgment debtor to pay the debt or to make installment payments on a periodic basis. In addition, if a judgment debtor fails to appear at any of these hearings, they may be found in contempt of court for an unreasonable failure to appear or to produce documentation about their financial affairs.
*Dan Barber and Mitch Dermer will be speaking to a sold-out audience at Small Business BC, Collecting Debts for your Small Business - Getting Paid.
Read other articles from the Fall 2011 Letter of the Law
Delaying Disclosure Has Consequences for Strata Developers
by Mark Thompson and Mitch Dermer
Court SLAPPs Lay Litigant with Special Costs
by Scott Brearley and Carmen Hamilton
Collecting a Judgment
by Mark Stacey and Mitch Dermer
A Settlement Agreement Successfully Defended
by Ian Jones
Hiring Foreign Workers for Your Construction Projects by Melanie Samuels and Carmen Hamilton
The Rules Have Changed But Litigation Remains the Same by Stephen Berezowskyj and Daniel Barber
Disclose Out-of-Court Agreements Immediately – Or Else! by Scott Brearley
Editor’s Note by David Perry
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