Corporate Debt Recovery
When a business is owed money and informal efforts have not produced results, litigation is often the most effective path to recovery. Our corporate debt recovery lawyers represent businesses and organizations in Ontario and British Columbia pursuing commercial debtors, enforcing judgments, and recovering what they are owed through the courts.
Speak With a Debt Recovery LawyerWhat Is Corporate Debt Recovery?
Corporate debt recovery is the process of collecting money owed to a business through legal means. It goes beyond the work of a collections agency: commercial debt recovery through litigation involves issuing a claim, obtaining judgment, and enforcing that judgment against the debtor's assets. It is the appropriate step when a debtor has refused to pay, is disputing the amount owed, or has not responded to demand letters and informal collection efforts.
Businesses are owed money in many situations: unpaid invoices for goods or services delivered, loans that have not been repaid, deposits that have not been returned, contractual payments that have been withheld, and amounts owed under personal guarantees. A debt recovery lawyer can assess the most efficient path to recovery in each situation, taking into account the amount owed, the debtor's likely assets, and the cost of pursuing the matter through the courts.
Commercial debt recovery is different from consumer debt collection. The regulatory framework is different, the amounts involved are typically larger, the debtors are often sophisticated parties with their own legal counsel, and the proceedings take place in the commercial courts rather than through consumer protection processes. Having experienced commercial debt recovery lawyers on your side from the outset makes a material difference to both the speed and the outcome of the process.
How Corporate Debt Recovery Works
Effective commercial debt recovery follows a logical progression. The right approach at each stage depends on the amount owed, the debtor's circumstances, and the response to earlier steps.
Formal Demand Letter
The first step in most corporate debt recovery matters is a formal demand letter from a debt recovery lawyer. A letter from counsel puts the debtor on notice that litigation is the next step if payment is not made, and it creates a record that you have given the debtor a reasonable opportunity to pay before proceedings commenced. A significant proportion of commercial debts are resolved at this stage, particularly where the debtor does not have a genuine dispute about the amount owed and simply needs the credibility of legal involvement to prioritize payment.
Issuing a Claim
Where a demand does not produce payment, the next step is issuing a statement of claim in the appropriate court. In Ontario, claims above the Small Claims Court limit of $35,000 are brought in the Superior Court of Justice. In BC, claims above the Small Claims threshold proceed in the Supreme Court of British Columbia. Once served, the debtor has a limited time to file a defence. Where no defence is filed, a default judgment can be obtained without a trial.
Default Judgment
If the debtor does not respond to the claim within the prescribed time, a default judgment can be obtained. This is often the most efficient outcome in straightforward debt recovery matters where the debtor has no genuine defence. A default judgment carries the same legal weight as a judgment obtained after a trial and can be enforced against the debtor's assets immediately.
Summary Judgment
Where the debtor has filed a defence but the claim is straightforward and the defence has no real prospect of success, a motion for summary judgment may be available. This allows the court to decide the matter without a full trial, which significantly reduces the time and cost of recovery. Summary judgment motions are particularly useful in debt recovery matters where the debt is well-documented and the defence amounts to delay tactics rather than a genuine dispute.
Trial
Where the debtor raises a genuine defence and the matter cannot be resolved by summary judgment or negotiation, the matter proceeds to trial. Commercial debt recovery trials are decided on the evidence: the documentation of the debt, the terms of the agreement under which it arose, and the conduct of the parties. We prepare every debt recovery file for trial from the outset, because that preparation is what produces results at every earlier stage as well.
The longer a commercial debt goes unpaid, the harder it can be to recover. Call us to understand the most effective approach for your situation.
1-800-771-7882 Talk to a Commercial Debt Recovery LawyerJudgment Enforcement: Collecting After You Win
Obtaining a judgment is the first step, not the last. A judgment gives you the legal right to be paid, but it does not automatically put money in your hands. If the debtor does not pay voluntarily after judgment, enforcement proceedings are required to compel payment from their assets.
Examination in Aid of Execution
Before pursuing specific enforcement steps, it is often useful to examine the debtor under oath about their assets, income, and financial circumstances. This examination in aid of execution, sometimes called a debtor's examination, allows the creditor to identify what assets are available for enforcement and where they are located. The information obtained shapes which enforcement mechanisms are most likely to produce results.
Writ of Seizure and Sale
A writ of seizure and sale, filed with the Sheriff in Ontario or the BC Sheriff Service, creates a lien against the debtor's real property in the jurisdiction where it is filed and allows the Sheriff to seize and sell personal property to satisfy the judgment. Where the debtor owns real estate, a writ filed against that property will need to be satisfied before the property can be sold or refinanced, which creates significant leverage even if immediate enforcement is not pursued.
Garnishment
Garnishment allows the creditor to intercept money owed to the debtor by a third party, such as a bank account or amounts owing from a customer or employer. A garnishment notice is served on the third party, who is then required to pay those funds to the court rather than to the debtor. Garnishment is one of the most direct and effective enforcement tools available where the debtor has a known bank account or receivables.
Appointment of a Receiver
In more complex debt recovery situations, particularly where the debtor is a business that is continuing to operate, a court may appoint a receiver to take control of and liquidate the debtor's assets for the benefit of creditors. Receivership is a significant step that affects all of the debtor's creditors, not just the applicant, and it requires careful analysis of whether it is the most appropriate enforcement mechanism in the circumstances.
Proceedings Against Guarantors
Where a director, shareholder, or related party has provided a personal guarantee of the corporate debt, proceedings can be brought against the guarantor directly. Guarantor claims are often the most practical path to recovery where the corporate debtor has limited assets but the guarantor has personal assets available. The enforceability of the guarantee, including whether it was properly executed and whether the creditor has complied with any conditions, is an important part of the early analysis.
Common Corporate Debt Recovery Situations
Unpaid Invoices and Trade Debt
Unpaid invoices for goods delivered or services rendered are among the most common commercial debt recovery matters. Where a customer has received the benefit of the goods or services and has refused or failed to pay, the documentation of the debt is typically straightforward and the focus is on the most efficient path to recovery given the amount owed and the debtor's circumstances.
Loan and Credit Facility Recovery
Where a business has advanced a loan or extended credit to another party that has not been repaid, recovery proceedings may be required. The terms of the loan agreement, whether security was taken, and whether personal guarantees were provided all affect the recovery strategy. Secured creditors have priority over unsecured creditors in insolvency proceedings, which makes proper documentation of security interests an important part of commercial lending from the outset.
Disputed Debts
Not all debt recovery matters are straightforward. Where the debtor disputes the amount owed, alleges that the goods or services were defective, or raises a counterclaim that offsets part or all of the debt, the matter becomes a contested commercial dispute rather than a simple collection matter. We assess the debtor's position honestly and advise on the most effective way to proceed given the strength of any defences raised.
Cross-Border Debt Recovery
Where a debtor is located in another province or outside Canada, additional steps may be required to obtain and enforce a judgment. We advise on the most practical approach to cross-border commercial debt recovery, including whether proceedings in Ontario or BC are the most effective starting point and what steps are required to enforce a Canadian judgment against assets located elsewhere.
Every debt recovery situation is different. The right strategy depends on the amount owed, the debtor's assets, and the strength of any defence. Call us for a direct assessment.
1-800-771-7882 Get Advice From a Commercial Debt Collection LawyerCorporate Debt Recovery in Ontario and British Columbia
The procedural rules for commercial debt recovery differ between Ontario and BC in ways that affect strategy and timing. We practice in both provinces and advise clients on the most effective approach in each jurisdiction.
Ontario
In Ontario, commercial debt recovery proceedings above $35,000 are brought in the Superior Court of Justice. The Rules of Civil Procedure govern the process, including timelines for serving and filing documents, the availability of summary judgment, and the enforcement mechanisms available after judgment. Mandatory mediation applies to most civil proceedings in Toronto, Ottawa, and Windsor, which can provide an opportunity to resolve a contested debt matter before trial. The two-year limitation period under the Limitations Act, 2002 applies to most debt recovery claims, running from the date the debt became due or the date the debtor's refusal to pay was discovered.
British Columbia
In BC, commercial debt claims above the Small Claims threshold proceed in the Supreme Court of British Columbia under the Supreme Court Civil Rules. BC has its own enforcement mechanisms, including the Court Order Enforcement Act, which governs garnishment, seizure, and other post-judgment remedies. The two-year limitation period under BC's Limitation Act applies to most debt recovery claims. We advise clients on the applicable rules in BC and how they affect the debt recovery strategy.
Corporate Debt Recovery: Frequently Asked Questions
How long do I have to bring a debt recovery claim in Ontario or BC?
In both Ontario and BC, the basic limitation period for most commercial debt claims is two years from the date the debt was due or the date you discovered the debtor was not going to pay. Missing the limitation period can bar your claim entirely, even if the debt is clearly owed. If you are uncertain whether your claim is within the limitation period, get legal advice promptly rather than waiting.
What is the difference between a debt recovery lawyer and a collections agency?
A collections agency contacts debtors and attempts to negotiate payment, typically on a contingency basis. A debt recovery lawyer can do all of that and can also issue legal proceedings, obtain judgment, and enforce that judgment against the debtor's assets. Where informal collection efforts have failed or the debtor is disputing the amount owed, a debt recovery lawyer is the appropriate next step. We can also advise on whether the debtor's conduct in refusing to pay gives rise to additional claims beyond the debt itself.
The debtor says they dispute the amount. Does that mean I have to go to trial?
Not necessarily. Many disputed debts are resolved through negotiation or mediation once proceedings have been commenced and both sides have a clearer picture of the evidence. Where the debtor's dispute has no real legal merit, a motion for summary judgment may allow the court to decide the matter without a full trial. We assess the debtor's stated defence honestly and advise on the most cost-effective path to recovery given the strength of that defence.
What happens if I get a judgment but the debtor does not pay?
A judgment gives you the legal right to enforce against the debtor's assets. Enforcement mechanisms include garnishment of bank accounts and receivables, seizure and sale of personal property, writs against real property, and in appropriate cases the appointment of a receiver. The right enforcement mechanism depends on what assets the debtor has and where they are located. An examination in aid of execution can be used to compel the debtor to disclose their assets under oath.
Can I recover my legal costs in a debt recovery matter?
Partially. Ontario and BC courts typically award costs to the successful party in litigation, but those awards cover only a portion of the actual fees paid. In straightforward debt recovery matters where the debtor has no genuine defence, the cost award can be a meaningful contribution to recovery costs. Where the debt is large enough to justify litigation and the debtor has assets available for enforcement, the overall recovery can significantly exceed the net cost of the proceeding.
The debtor is a corporation with no assets. Can I go after the directors personally?
In limited circumstances, yes. Directors of corporations can be personally liable for certain corporate debts, including unpaid wages in some situations and debts incurred when the director knew the corporation was insolvent. Where a director has provided a personal guarantee, that guarantee can be enforced directly. We assess whether any basis for personal liability exists in your specific situation and advise on whether pursuing the directors directly is a practical recovery option.
Is it worth pursuing a small commercial debt through the courts?
It depends on the amount, the cost of proceeding, and the debtor's ability to pay. For smaller commercial debts in Ontario and BC, the Small Claims Court provides a faster and less expensive process up to $35,000. For larger amounts, the Superior Court or BC Supreme Court is required. We give clients an honest assessment of the cost and likely recovery at the outset so they can make an informed decision about whether proceeding makes commercial sense.
Speak With a Corporate Debt Recovery Lawyer
Tell us about your situation. We will follow up promptly to discuss your options. You can also reach us directly at 1-800-771-7882.