Commercial Debt Recovery in Ontario: How the Process Works and How to Protect Your Rights
An unpaid invoice, a defaulted business loan, a contract that was never honoured: commercial debts disrupt cash flow, strain operations, and can threaten the financial stability of businesses of every size. Knowing how to recover what you are owed, and acting before the window closes, is one of the most practical things a business can do to protect itself.
This article explains how commercial debt recovery works in Ontario, the step-by-step process from demand letter to judgment enforcement, the critical limitation period, and when urgent court action may be necessary to prevent assets from disappearing. For businesses in British Columbia, the same principles apply with some procedural differences covered below.
Many debts are recovered before trial through a combination of a lawyer-drafted demand letter and negotiation. Where assets are at risk of being moved or dissipated, urgent court action including a Mareva injunction may be necessary before proceedings are even served.
What is commercial debt recovery?
Commercial debt recovery is the legal process of collecting money owed by a business or corporate entity. It is distinct from personal debt collection in the nature of the claims, the amounts typically involved, and the legal mechanisms available.
Common situations that give rise to commercial debt recovery proceedings include:
- Unpaid invoices for goods delivered or services rendered
- Breach of a commercial contract where payment obligations were not met
- Defaulted business loans or corporate advances
- Dishonoured cheques or failed electronic transfers
- Unpaid amounts following a settlement agreement that was not honoured
- Debts arising from a failed joint venture or partnership arrangement
The complexity of commercial debt recovery varies significantly depending on the amount involved, whether the debtor disputes the debt, the debtor's financial position, and whether assets are at risk of being moved or concealed. A straightforward unpaid invoice may be resolved with a demand letter. A disputed debt with a debtor who is moving assets requires a different and more urgent approach.
Why acting quickly matters
Two factors make speed critical in commercial debt recovery: the limitation period and the risk of asset dissipation.
Under Ontario's Limitations Act, 2002, the basic limitation period for a debt claim is two years from the date you discovered, or ought to have discovered, that the debt was owed and unpaid. Missing this deadline permanently bars your ability to sue for the debt regardless of how clearly it is owed. In BC, the same two-year period applies under the Limitation Act.
The second risk is more immediate: debtors who know a claim is coming may transfer assets to related parties, draw down bank accounts, encumber property, or otherwise put assets beyond reach before a judgment can be obtained. Acting quickly and, where necessary, seeking urgent court relief preserves the assets available for enforcement.
The commercial debt recovery process in Ontario
Send a formal demand letter
The first step in most commercial debt recovery matters is a formal demand letter setting out the amount owed, the legal basis for the claim, and a deadline for payment. A lawyer-drafted demand letter signals that legal proceedings will follow if payment is not made and often prompts payment or opens settlement discussions without the need for court proceedings. Many debts are recovered at this stage. See our guide on demand letters in commercial disputes for what an effective demand letter should include.
File a statement of claim
If the demand is not met, proceedings are commenced by filing a statement of claim in the appropriate court. For debts up to $50,000 (as of October 1, 2025), claims can be filed in Ontario Small Claims Court, which has a simplified procedure, lower costs, and faster timelines. For debts above $50,000, claims are filed in the Ontario Superior Court of Justice. The statement of claim sets out the debt, the factual basis for it, and the remedy sought.
Attempt pre-trial resolution
After the claim is served, parties typically exchange documents and attempt to resolve the matter through negotiation, mediation, or a settlement conference. The majority of commercial debt claims settle before trial. In Ontario, mandatory mediation applies to most Superior Court proceedings in Toronto, Ottawa, and Windsor. A negotiated resolution avoids the cost and delay of a full trial and provides certainty for both parties.
Proceed to trial if necessary
Where the debt is disputed and settlement is not achievable, the matter proceeds to trial. A judge will assess the evidence, determine whether the debt is owed, and issue a judgment ordering repayment. In straightforward debt claims where the debtor does not file a defence, a default judgment can be obtained without a full trial, significantly reducing the time and cost of the process.
Enforce the judgment
Obtaining a judgment is not the end of the process: it must be enforced. Enforcement mechanisms in Ontario include garnishment of the debtor's bank accounts or wages, a writ of seizure and sale allowing the sheriff to seize and sell the debtor's personal property, registration of the judgment against the debtor's real property, and examination of the debtor in aid of execution to compel disclosure of their assets. A judgment is valid for 10 years and can be renewed.
Urgent remedies: Mareva injunctions and asset preservation
Where there is a real risk that a debtor will move, hide, or dissipate assets before a judgment can be obtained, urgent court action may be necessary. A Mareva injunction is a court order that freezes the debtor's assets to prevent them from being transferred or concealed while the proceedings are underway.
Mareva injunctions can be obtained urgently and without notice to the debtor in appropriate cases, meaning the debtor's assets are frozen before they know the proceeding has been commenced. The requirements are demanding: the applicant must show a strong prima facie case, a real risk of asset dissipation, and provide full and frank disclosure of all material facts along with an undertaking as to damages.
Where a debtor has already begun moving assets, other remedies may be available including orders to set aside fraudulent conveyances under Ontario's Fraudulent Conveyances Act. These remedies are specialized and require immediate legal advice to pursue effectively.
Suspect the debtor is moving assets or dissipating funds?
Every day of delay increases the risk that assets will be beyond reach by the time judgment is obtained. A Mareva injunction can freeze assets urgently, sometimes within hours. Act immediately.
Call: 1-800-771-7882 Speak With a Debt Recovery LawyerEnforcement mechanisms in detail
The specific enforcement tool that is most effective depends on what assets the debtor has and where those assets are held. A thorough assessment of the debtor's financial position before commencing proceedings helps identify the most efficient enforcement path.
Garnishment
Garnishment allows the creditor to intercept payments owed to the debtor by third parties, most commonly bank accounts and wages. A notice of garnishment is served on the bank or employer, who must then pay the intercepted amounts to the court for distribution to the creditor. Garnishment is one of the most effective enforcement tools where the debtor has regular income or accessible bank accounts.
Writ of seizure and sale
A writ of seizure and sale is filed with the sheriff and authorizes the seizure and sale of the debtor's personal property to satisfy the judgment. It can also be filed against real property, creating a charge on the property that must be paid before the property can be sold or refinanced. Writs are registered with the Personal Property Security Registration system and against title to real property.
Examination in aid of execution
If the debtor's assets are not known, the creditor can require the debtor to attend a court examination and answer questions under oath about their financial position, assets, income, and debts. This process can reveal assets that were not previously known, including assets held in the names of related parties or corporate entities that may be subject to further proceedings.
Charging orders and equitable execution
Where the debtor holds assets that cannot be seized directly, such as interests in partnerships or closely held corporations, courts can grant charging orders or other equitable execution remedies that attach the creditor's claim to those interests. These remedies require specific legal analysis of the debtor's ownership structure.
Owed money by a business in Ontario or BC?
Achkar Law represents creditors across Ontario and British Columbia in commercial debt recovery, from demand letters and urgent injunctions through to judgment enforcement. The two-year limitation period is already running.
See Our Debt Recovery Practice Or call us: 1-800-771-7882Commercial debt recovery in British Columbia
BC creditors face the same fundamental process as Ontario creditors, with some procedural differences. Claims are filed in BC Small Claims Court (up to $35,000) or BC Supreme Court (above $35,000). The basic limitation period is two years from discovery under BC's Limitation Act.
BC enforcement mechanisms are similar to Ontario's: garnishing orders, civil enforcement through court bailiffs, and registration of judgments against real property. BC's Law and Equity Act and Court Jurisdiction and Proceedings Transfer Act govern some aspects of judgment enforcement across provincial boundaries, which is relevant where a debtor has assets in multiple provinces.
Mareva injunctions are equally available in BC Supreme Court proceedings and are subject to the same requirements as in Ontario. Where a debtor with BC assets is dissipating them, urgent action in BC Supreme Court may be necessary even where the underlying debt arose in Ontario.
Practical takeaways
Frequently asked questions
What is commercial debt recovery in Ontario?
Commercial debt recovery is the legal process of collecting money owed by a business or corporate entity, typically arising from unpaid invoices, breach of contract, or defaulted business loans. It involves a defined process from demand letter through to judgment enforcement, governed by Ontario's civil procedure rules and the Limitations Act, 2002.
How long do you have to collect a debt in Ontario?
The basic limitation period under Ontario's Limitations Act, 2002 is two years from the date you discovered or ought to have discovered that the debt was owed and unpaid. Missing this deadline can permanently bar your ability to sue for the debt. In BC, the same two-year period applies under the Limitation Act. If you are approaching the two-year mark, seek legal advice immediately.
What happens after you get a judgment in a debt recovery case?
A judgment must be enforced if the debtor does not pay voluntarily. Enforcement mechanisms in Ontario include garnishment of bank accounts and wages, writ of seizure and sale of personal property, registration against real property, and examination of the debtor in aid of execution to identify assets. A judgment is valid for 10 years and can be renewed.
What is a Mareva injunction and when is it used in debt recovery?
A Mareva injunction freezes a debtor's assets to prevent them from being hidden, transferred, or dissipated before a judgment can be obtained. It is used where there is a real risk the debtor will move assets out of reach. It can be obtained urgently and without notice to the debtor in appropriate cases. The applicant must show a strong prima facie case, evidence of dissipation risk, and provide full disclosure and an undertaking as to damages.
Can a debt be recovered without going to court in Ontario?
Yes. Many commercial debts are recovered through a formal demand letter and negotiation, without court proceedings. A lawyer-drafted demand letter often prompts payment or opens settlement discussions. Where the debtor is willing to engage, a structured payment arrangement or settlement can be reached efficiently. Court proceedings become necessary where the debtor disputes the debt, ignores demands, or is at risk of dissipating assets.
What is the difference between Small Claims Court and Superior Court for debt recovery in Ontario?
As of October 1, 2025, Ontario's Small Claims Court handles debt claims up to $50,000 with a simplified procedure, lower costs, and faster timelines. Claims above $50,000 are filed in the Ontario Superior Court of Justice, which provides access to full discovery and more complex procedural tools including injunctions and Mareva orders. For claims modestly above $50,000, abandoning the excess to stay in Small Claims Court is worth considering.
Owed money by a business in Ontario or BC? Act before the limitation period runs.
Commercial debt recovery requires prompt action, strategic judgment about the debtor's assets, and the right legal tools at each stage. Achkar Law represents creditors across Ontario and British Columbia in corporate debt recovery, from demand letters and Mareva injunctions through to judgment enforcement. We will assess your position and advise on the most effective path to recovery.
Call us at 1-800-771-7882 or fill out the form below and we will be in touch.