Debt/Lender Enforcement

Debts and Loans

If you or your business have loaned money, given supplies, or provided services that have not been remunerated or paid back by an agreed time, you as a creditor can bring an action to the court to have the debt repaid.

Generally, there are two types of creditors: secured and unsecured. Secured creditors often secure debts against a debtor’s assets (known as “collateral”), whereas an unsecured creditor has simply provided supplies, services, or funds without obtaining anything in return.

Secured creditors are often major companies or financial institutions that obtain security because of the amount of funds at issue. Car companies often secure debts against the vehicles under the Personal Property Security Act (“PPSA”). Banks also secure debts under the PPSA against machines, capital and other goods. Banks and lenders can also secure debts under the Mortgages Act against land and real property.

Secured creditors can often exercise their own remedies if the collateral is recoverable. To do so, the security must first be “perfected” and registered under the PPSA or on title to property.

Despite the availability of self-help remedies, secured creditors often need recourse to the courts. At NuriLaw, we routinely act for private lenders in commencing Power of Sale proceedings to recover properties that have been secured.

In contrast, unsecured creditors are not able to seize the debtor’s assets in order to repay the outstanding debt- a court order must be obtained to do this. Once a court order is obtained, the unsecured creditor must often enforce the order, such as seek a writ of seizure and sale. This allows the unsecured creditor (a judgement creditor once a court order is obtained) to ask the Sherriff’s office to seize assets, which can then be re-sold to satisfy the outstanding debt. Other court orders that can also be obtained, such as garnishment, which results in the debtor’s wages being paid to the judgement creditor.

Complications can arise when a bankruptcy is involved. If the debtor cannot pay outstanding debts, or is insolvent, the debtor can file for bankruptcy or a consumer proposal.  This often involves a host of complications under the Bankruptcy and Insolvency Act (the “BIA”). The unsecured creditor may need to file a proof of claim, and be prepared to receive a significant reduction on their claim. This is because once a debtor enters bankruptcy or a consumer proposal, all proceedings against a debtor are stayed (suspended). The debtor can attempt to make a compromise with its creditors and negotiate a payment plan. If the debtor follows its obligations under the BIA it is then discharged of its debts and emerges from bankruptcy.

If you have an issue involving an outstanding debt, our team at NuriLaw would be happy to help. Call us now to set up a consultation at (416) 323-5092. We look forward to hearing from you.