UNPAID RECEIVABLES | OVERDUE INVOICES | UNPAID ACCOUNTS
Here are 5 things to consider before pursuing legal action on your overdue invoices
If you have unpaid invoices, overdue accounts, or outstanding receivables, let our experienced team assist you with your collection efforts. If you have already obtained a Judgment in Small Claims Court, check out our Enforcement page for more information. Otherwise, here are five things you may want to consider before commencing legal action.
Whether you have an overdue account amounting to $500.00 or $50,000.00, money owed means something to everyone.
The first thing to note is that the Ontario Small Claims Court has a monetary limit of $35,000.00. You may pursue a debt in excess of $35,000.00 in Superior Court, or in Small Claims Court by waiving any excess amounts above the $35,000.00 limit. If you choose to proceed with the latter, you waive your right to collect any of that excess money. The British Columbia Small Claims Court has a monetary limit of $35,000.00 and Alberta Small Claims Court has a monetary limit of $50,000.00. The same rules regarding waiving excess funds may apply. After you have answered all questions outlined here, you may wish to contact us to discuss which avenue of pursuit is best for your particular situation.
The next thing to consider is a cost-benefit analysis of amounts owing. We understand that every dollar matters to you but sometimes it is simply not cost effective to pursue legal action. The cost to file a claim in Small Claims Court in Ontario is $102.00. In British Columbia, the filing fee is $156.00 and in Alberta the filing fee ranges from $100.00 to $200.00 depending on your claimed amount. The cost of litigation is directly correlated to the course of the file as a whole but based on our experience we find clients may spend upwards of $2,000.00 in legal fees for what they may consider to be a “straightforward” matter. The more complex your file is, the more money it will cost you to pursue legal action. You should be mindful that you cannot include your legal fees in the amount you sue for, and there are limited circumstances in which you can recover a portion of your legal fees. This means that a portion of your legal fees will be paid out-of-pocket and will be non-recoverable. Our team of experienced paralegals can help you identify what costs are recoverable in what circumstances.
For the reasons outlined above, we often suggest that it may not be cost-effective to pursue legal action for debts under $2,500.00. Is the debt you want to pursue less than $2,500.00? Don’t worry! We have alternative solutions to help you, outlined here.
2. When did you realize that you may not be paid for your outstanding invoice/account?
Typically, you have two years to pursue a debt in Ontario, Alberta and British Columbia, and therefore it is imperative that you act fairly quickly on any outstanding debts. This is called a “limitation period”. Your time limit to pursue legal action for an unpaid debt may start when you knew, or ought to have known, that the debt was not going to be paid. Beware! If you miss your limitation date you may forfeit your right to start legal action or it may be detrimental to your case. If you are unsure of what your limitation date may be, our team may be able to assist you in determining the date.
3. Do you have an agreement in writing?
Whether you have lent someone money or provided services for a fee you are not required to have the terms of your agreement in writing, but it helps! Typically, we look for the following information in written agreements:
• Payment or repayment terms and dates
• Any applicable interest rates
• Penalties or consequences of non-payment
• Default ramifications (for example, is Arbitration an initial requirement?)
• A signature from both parties
If your agreement is not written, do you have anything that shows the intent of both parties? Text messages, e-mails, invoices, proof of services completed, or proof of money paid or transferred are examples of the types of support we may look for to show intent when there is an unwritten or verbal agreement.
4. Do you know where the debtor lives or carries on business?
If you have decided to commence legal action, you must have the means to serve the party you are suing. There are various rules of service, but we recommended to start with a residential address if you are suing an individual, or a registered office address if you are suing a business. Having this information will also help to determine where legal action should be started.
If you do not have this information readily available, we may be able to complete a search to assist you in finding this information.
5. Does the debtor have the means to pay the money owing to you?
This may be the most important point to consider when deciding to commence legal action. If the debtor does not have the means to pay the debt, you may be spending more money to chase an unattainable result. Something that a lot of people outside of the legal field don’t realize is that the Court will not collect your money for you, even if they agree that you are owed money! With that said, it is even more important to weigh your options of collection before you even start the legal process. If you are successful in a legal action, you may be able to use one or more of the following tools in order to collect the money owing to you:
• Banking information
• Employment information
• Property ownership
• Seizure of assets
If you’re looking for more information or further assistance on starting your legal action, you can schedule a free telephone consultation with one of our paralegals to discuss the ways in which we can assist you in collecting your debt. Click here to schedule your free consultation today!