The Deadbeat Debtor – Is it Worth it?

All too often, creditors are forced to face the realization that their debtor cannot, or simply will not, pay. Whether it be because of a tenant, purchase of goods or contractor, the creditor is faced with very few avenues to recover the debt. The creditor is forced to consider taking ten cents on the dollar and drawn-out payment plan or bringing a formal court action.

While suing a defaulting debtor can lead to a relatively quick judgment as some defaulting debtors simply do not defend, the creditor then faces the realization that the judgment they have obtained is not worth the payment it is written on. The creditor has spent time and money, including legal fees, to obtain a judgment that they will never collect on. To avoid this pitfall, there are ways for creditors to attempt to act quickly to ensure they obtain some form of payment.

First, focussing specially on the commercial landlord, landlords can attempt to distrain on their tenant’s property. In doing so, the landlord must act quickly as one can only distrain on property that remains on the leased property. The landlord must also avoid the common pitfall of terminating the lease and then attempting to distrain, as once a lease is terminated, the landlord’s right to distrain goes by the wayside.

Creditors may also attempt to register a lien in order to protect their interests. While the most well know lien is the builders’ lien, there are other lesser-known processes provided for in The Woodmens’ Lien Act, The Commercial Liens Act and The Threshers’ Lien Act. Any creditor who may have lien rights should act quickly to ensure the funds that are being held back under the lien legislation are not disbursed.

If you are one of those unfortunate creditors who cannot utilize a lien to enforce the debt, and do not have a security interest in the debtor’s property, you may be forced to consider whether pursuing the debt is worth while. If the debtor is unwilling to agree to a payment plan or other resolution, you will be forced to gamble on whether you can enforce your judgment through The Enforcement of Money Judgments Act. In making that decision, there are a few considerations worth noting:

  1. Does the debtor have land and if so, how many mortgages or judgments are registered against it? It is important to note that pursuant to the Bankruptcy and Insolvency Act and The Saskatchewan Farm Security Act, the debtor is entitled to certain exemptions for their homestead or home-quarter, as the case may be.
  2. Does the debtor own any vehicles and if so, more than one?
  3. Have you run a judgment search? If there are several judgments already registered against a debtor, the chances of you collecting are reduced as there are more people claiming a piece of the pie.
  4. If the debtor is a corporation, are they up to date on their taxes and payroll remittances? CRA holds a super priority interest on a debtor’s asset for unpaid remittances. Furthermore, the failure to remit to CRA is usually a strong indicator of financial health, or lack thereof.

In short, it is usually helpful to determine ahead of time if there is any meaningful chance of enforcing your judgment. This will help you save time, money and frustration in chasing a dead beat debtor who will not, and probably cannot, pay.

Contacting a Lawyer on this Subject

Should you require more information on how to efficiently and cost-effectively recover against your debtors, please contact Travis K. Kusch at (306) 933-1373

Benchmark Litigation Canada Lists RS as Recommended Firm in Saskatchewan

Benchmark Litigation Canada has published its guide to the leading litigation teams in the country.

The guide’s results are the culmination of a four-month research period during which time extensive interviews are conducted with litigators and their clients.  The researchers examine casework handled by the firms and seek opinions on litigators practicing within their province or practice area. Using this client and peer-review methodology, Benchmark strives to provide the most accurate and comprehensive coverage of the Canadian litigation market.

Robertson Stromberg is pleased to see that the firm is ranked as a Recommended Firm for the province of Saskatchewan. Lawyers singled out as “local litigation stars” include M. Kim Anderson in the area of Insolvency Law and Gary Young in the areas of Class Action, Commercial, Insurance, and Intellectual Property.   This designation reflects individuals who were recommended consistently as reputable and effective litigators by clients and peers.

Benchmark also lists Jennifer Pereira and Sean Sinclair as “future stars”.  This designation is given to “ones to watch”, lawyers who are rapidly building their reputations in the market.

 

 

Area of Expertise Bankruptcy and Insolvency