To Sue or Not to Sue, That is the Question

With the coming of spring and life reborn, thoughts turn to the sounds of returning robins, upcoming summer vacations and time to spend outdoors with friends and family.

In reality, you should be thinking about people who owe you money and how to get paid.

A demand letter sent by us to your debtor followed up by a statement of claim is great if it gets you paid.  If not, it is a waste of time and money.

 So, how to decide when to pay us to chase a debt for you?

 Here are some tips, hopefully you are using some or all of them already:

           do you have lien rights, whether they are construction liens, repair liens or PPSA liens?  If so, there are mechanisms to register your liens to protect your rights in the property and possibly arrange for a seizure to then force payment on the debt

           if you could use lien rights as a means of leverage with your customers in the future, then consider setting up an appointment with our corporate lawyer, Scott Young, who can prepare the necessary paperwork for you to have your customers sign before you do work for them.

           Has a debtor bounced a cheque on you?  Consider trying to certify it a half dozen times before you contact us to send a demand letter or chase the debt in court.  If you can’t certify it a half dozen times, this may give you an indication of how successful collection by us will be.

           How sophisticated is your debtor?  Threats of litigation or actual litigation can spur payment at an early stage from unsophisticated debtors.

           Limit your own demands for payment to two verbal demands and 1 written demand.  If payment is not forthcoming, continued demands by you for payment without taking any other action is like having a guard dog with no teeth.  If payment is not forthcoming, it is time to engage legal counsel.

           If you are a supplier of product, put your debtor on COD payment status, requiring double payments for any product ordered.

           Is the debt owed to you between $10,000.00 and $25,000.00?  Consider waiting until 2010 to sue, as the small claims court limit will be moving to $25,000.00 on January 1, 2010.

           Significant legal cost savings can be had by proceeding in small claims court, so consider waiving a part of the debt if you are owed more than the small claims court limit.

           Beware of the general limitation period of 2 years to sue from the time of default by the debtor in delivering payment to you.

           In your dealings with your debtor, did she/he/it authorize you to conduct a credit inquiry?  Do an updated inquiry with the Credit Bureau or Equifax and see what it reveals about the debtor’s financial status.

           Have us conduct a PPSA or writ search on the debtor.  Sometimes Rev Can will register in those systems for unpaid remittances.  If there is a debt owing to the government, the likelihood of collection via litigation may be slim unless a voluntary payment is made by your debtor in settlement.  Writ searches will also reveal any other creditors who have already obtained judgment.

           If the debtor owns real estate, have us conduct a property search to reveal the extent of mortgages on the property.  If it is mortgaged to the hilt, it will not be a viable source for payment on your judgment if the debtor defaults with the bank.

 –          Don’t chase the carrot, squish it underfoot.  Some debtors dangle small payments in front of your nose while still racking up their debt with continued purchases.  It’s a loser’s game, and we know which side you are on if you choose to play.  Focus your energy on paying customers and let us chase payment from the deadbeat.

 I look forward to hearing about your summer plans and who you want me to sue.

Paul H. Voorn

Litigation Association –

tel:  416-620-7020 ext. 23