September 5, 2017

The answer to that question is not very clear it is a bit of a gambit – generally speaking institutional creditors are unlikely to waste their money suing people for low levels of debt. The maximum amount that can be sued in Ontario Small Claims Court is $25,000. Anything above that must be heard before a judge in a Superior Court of Justice hearing.  However, that doesn’t mean they won’t sue it just means that for smaller amounts of money they are less likely to as it is often not cost effective.

It is true that anything can happen, but generally speaking the savvy creditor or collector will contemplate the cost and benefits of suing before they spend their client’s money.   After all even if the creditors are successful, and they likely will be if you owe money, what happens after the creditor wins in court?  Even with a judgment from the court creditors still have the problem of collecting the money owed – but from where; garnishees of income or bank accounts, seizure and sale of property?

Seizure and sale of property is often costly and can be problematic especially if there are multiple owners and only one has been sued or if the value of the asset has been depleted.  So what about someone who has no assets, no accounts and lives on an income that cannot be executed against (seized) such as ODSP, Welfare or Government Pensions?   In such a case the judgment is pretty worthless – rendering the debtor as “bullet proof“. 

Being bulletproof doesn’t mean that the debt is no longer owed or even that collection activity will necessarily cease, after all a judgment may continue to accrue interest.  And the basic limitation period of the Limitation Act does not apply to judgments.  So if the creditor doesn’t sue, what happens after two years and the statute of limitations, set out in the Limitation Act, runs out?

Stay tuned for another blog on the Limitations Act and its implications.