Debt collection in Canada is subject to the laws and regulations set forth by two legal systems. The first, based on the United Kingdom’s Common Law, is enacted throughout virtually all of the country, excluding Quebec. In that province, the legal system and regulations are setup to mirror the French Code Napoleon. Collection Agency Service Canada is bound by both systems.
1.1 The Amicable Phase
Our goal during the amicable phase of collection is to remain professional and ensure a continued relationship between our client and the debtor. That’s important to this phase of the process, and our expansive team of professionals will pursue this phase of the process in-house. Collection Agency Service Canada works to recover debts via telephone contact as well as written contact with the debtor.
1.1.2 Local agent
We maintain direct contact with all of our debtors, and our clients, at all times. While we maintain this contact whenever possible, it is sometimes required of us to use LDC contacts in Canada in order to assist the collections process and make it more effective. Local regulations prohibit us from visiting debtors in person, however.
Laws and regulations passed by the national Canadian government do not permit companies, or debt collectors, to attach interest to an outstanding debt. However, this regulation can be superseded by any agreement between our client and the debtor that stipulates the addition of interest to an existing debt once it has been placed for collection. If this is the case, that interest — and any other costs — can be added to the total debt that we are trying to collect. It’s worth noting, however, that the Criminal Code of Canada prohibits the collection of interest over 60 percent and declares such a practice to be a crime.
1.1.4 Debt collection costs
Canada’s laws and regulations, as they pertain to debt collection, prohibit the attachment of any costs to the debt that might be imposed by the company or their collection agency. Collection Agency Service Canada adheres to this law, but is allowed to collect costs when such a possibility has been outlined in the terms and conditions set forth by our client and agreed to by the debtor.
1.2 Legal Procedures
The commercial laws that regulate debt collection and recovery in Canada are left up to each province or territory to decide. When it comes to bankruptcy, insolvency, and matters of the Canadian currency, however, federal jurisdiction reigns supreme. All of Canada’s provinces and territories, except Quebec, are governed by a common law system that originated in Great Britain and is based on that country’s laws. Quebec maintains a different system, instead based on the civil law system that can be found in France and several other European countries.
1.2.2 Required documentation
Beginning legal action can only be done when Collection Agency Service Canada has received the proper documents from the client to support their claim. That includes any documents that might be relevant to the dispute, including contracts, statements, and terms or conditions of the original lending product. Each of these documents must be in English or French; they must be verified and authenticated by a Notary in order to be permissible. For documents translated from another language, an expert must be on hand to certify their authenticity.
Collection Agency Service Canada does require up-front security costs that will help to ensure our own company’s financial integrity in the event that the client loses their case and the debtor wins theirs. Witnesses may be required for the trial, and can appear in person, via videoconferencing, or via telephone. These requirements do very between provinces and some exceptions or additions may be needed in some cases.
1.2.3 Procedure for legal dunning
An attorney, largely to help our clients reduce costs, carries about the legal dunning procedure. Collection Agency Service Canada will select an attorney who will attempt both verbal and written forms of communication with the debtor in question. These activities will occur within state and national laws and regulations, and will be a part of the amicable phase. This part of the process may include payment arrangements and discussions of a settlement to eliminate the debt. If such conversations fail, the attorney hired by Collection Agency Service Canada will engage in due diligence when determining the future course of action as it relates to the debt. Those courses of action will recommended to Collection Agency Service Canada and to our clients.
1.2.4 Lawsuits and legal proceedings
Moving into the lawsuit phase of the collection process can occur in one of two ways. First, it may occur if amicable collection efforts have simply failed, and the company has not recovered the amount that is owed by the debtor. Second, it may occur after the completion of the legal dunning procedure if the debtor has appealed any actions taken by the attorney therein.
The legal process surrounding a lawsuit can sometimes be a long one, lasting anywhere from a few months to several years. This is largely because each of the provinces and territories of Canada have different legal procedures, different laws and regulations for debtors, and varying senses of urgency as it relates to debt collection. Many provinces require extensive discovery procedures before the trial can begin, and this can set the timeframe back quite a bit. Still other provinces and territories have the ability to request settlement conferences throughout the legal procedure, further stymying efforts to reach a quick decision.
1.2.5 Costs of legal proceedings
Legal proceedings in Canada can be a costly move for clients to take. Collection Agency Service Canada estimates that legal costs in each of the territories and provinces within Canada start at around 450.00 CAD, with the ability to quickly rise to as much as 6,000.00 CAD. These costs don’t generally include the added expense of witnesses, experts, and others who might be key to the case’s success. Those things will further increase the cost of litigation for the clients who choose Collection Agency Service Canada. In all, those clients considering legal proceedings should be prepared to pay as much as 1,700.00 CAD to initiate the process. An estimation of these legal costs will be performed by Collection Agency Service Canada before the procedure is started, allowing clients to determine whether or not the procedure is worthwhile.
1.2.6 General timeframe
A legal dunning process usually takes between two and three months to complete. Court proceedings, on the other hand, often take at least a year to finish. More complex cases will tend to take longer, and clients could be waiting several years for the issue to be resolved in its entirety.
1.2.7 Costs of Legal Proceedings
The victor in any court case involving a debt will be entitled to recover the cost of court fees, expert and witness testimony, document copying costs, and some portion of travel costs. However, most costs associated with travel and witnesses are not eligible for full recovery. In fact, some provinces and territories specifically state that such costs cannot be recovered at all, by either side of the legal proceeding. Some provinces and territories do allow for the recovery of attorney’s fees for the case, as well as any administrative charges associated with the process. This is usually subject to special regulations and provisions set forth by the local government.
1.3 Insolvency and Bankruptcy Proceedings
The process of claiming financial insolvency is handled by Canada’s federal Bankruptcy and Insolvency Act. The Superintendent of Bankruptcy administers the act itself. This is done at a federal level, in court, rather than in the provincial court systems. Only a certified Trustee, as declared by the Superintendent of Bankruptcy, can handle the proceeding.
1.3.2 Bankruptcy Proceedings
There are four distinct bankruptcy options to clients and debtors in Canada. They include:
1. The Proposal
A proposal is drafted and agreed upon by the Trustee; it is then submitted to creditors in an attempt to settle any outstanding debts before a discharge is pursued or granted.
2. Bankruptcy Filing
This is the traditional discharge and liquidation process. An individual or company liquidates their assets to pay off their existing debts. Secured creditors are the first ones to have access to the liquidation funds. Unsecured creditors are given second priority. The creditor must file a claim with the Trustee in order to be entitled to any portion of the bankruptcy’s liquidation funds.
3. The Receivership Process
For corporate interests, a secured creditor will take control of the company’s assets during the insolvency process. An audit will be completed; when it is complete, the company can operate either under receivership or they may petition for a full-fledged bankruptcy proceeding.
4. Company Creditors’ Arrangement Act
The CCAA allows for a compromise to be established between an insolvent corporate entity and its unsecured creditors. This court-ordered process can last for several years at a time.
1.3.3 Required documentation
In order to file an insolvency claim for our clients, Collection Agency Service Canada needs the following documents:
– A Power of Attorney declaration
– Copies of any company invoices or contracts
– Copies of any orders or deliveries to the premises
– General condition of sale documents, if applicable
– Copies of relevant correspondence that may help the claim’s success
1.3.4 Expected timeframe and outcome
Deadlines relating to bankruptcy and insolvency proceedings in Canada vary between the country’s provinces and territories. That being said, however, the general time frame of completion for such procedures is typically between one and three years.