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If a creditor is owed money, they can choose to sue the debtor. If the creditor gets a judgment against the debtor, the creditor has the right to take certain actions to enforce the judgment.
Debts do not go away after a certain time. What does go away is the creditor's right to sue for an unpaid debt. For many debts, the creditor can sue you anytime up to two years after the last time you acknowledged the debt. You acknowledge a debt by making a payment or otherwise expressing in writing that the debt exists.
The law sometimes extends the time. For example, the time limit is paused when the creditor is not able to manage their affairs due to mental disability and not represented by a guardian. There is no time limit for collecting maintenance payments. In some cases, the government may be exempt from limitation periods.
The law may also shorten the time limit. For example, a creditor only has one year to sue if the debtor is a municipality.
However, once a creditor has a judgment, the creditor can collect on the judgment for 10 years. If 10 years is up and the creditor still has not received the money they are owed, the judgment can then be renewed for another ten years.
Before starting a court action, the creditor, collection agency or the creditor's lawyer will generally send a letter demanding payment. This letter is called a demand letter. The demand letter gives the debtor notice of the debt and states that if the debtor does not pay by a certain date, the creditor will sue in court.
Although a demand letter is the usual first step before suing for a debt, going to court does not always follow. At this time or any time during the court process, the creditor and the debtor may settle the claim. A settlement can include a new payment schedule or even an agreement to pay a lesser amount.
The creditor also needs to decide what court to start their action in. A creditor may sue in Small Claims Court or the Court of King's Bench. Suing in Small Claims Court is usually quicker and cheaper than suing in the Court of King's Bench but there is a limit on the amount that a person can sue for. For information about the process see Going to Small Claims Court or Going to King’s Bench Court.
If a creditor is going to sue, they must serve court papers on the person who owes them money. A lawsuit cannot be started without this step. If the debtor does not respond after being served with papers, the creditor can go ahead and ask the court to give them a judgment for the debt.
Regardless of whether the debtor responds or not, the creditor must prove to the court the amount of money that is owed before they can get a judgment.
Sometimes, a creditor needs to take steps to collect money owing under a court judgment. It is important to understand the process and options that may be available. For more information, see Collecting on a Judgment.
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