CREDIT & COLLECTION

A demand letter is a written request sent by a creditor (or his attorney to request the payment of monies that may be owing, the execution of an obligation or informing a person of a breach of a contract or legal obligation. Usually a delay is given to execute the obligation and an amount for damages is stipulated. A demand letter should be sent by registered mail or bailiff as these means can provide proof that the demand letter was sent and/or received.

The law states that you do not need to send a demand letter when the debtor is in default by the mere lapse of time (ie. not paying on time)or if the contract stipulates that doing or not doing something is a default. However, it is highly recommended to send a demand letter as this (i) may resolve the matter more quickly and cheaply than taking legal proceedings, (ii) starts the computation of interest if the contract or agreement does not provide for the payment of interests and (iii) is often required if a claim will be filed in small claims court.

In the province of Quebec, you can file a claim in the small claims court if (i) the amount claimed is less than $7,000.00 (ii) you are an individual or a company if it employed at most 5 employees during the last 12 months.

By writing the words ''WITHOUT PREJUDICE'' on a legal or demand letter it means that the recipient of the letter will not be able to produce your letter as evidence in court without your consent. The mention ''WITHOUT PREJUDICE'' is often used when letters are exchanged in view of settling a legal conflict so that settlement proposals exchanged between the parties will not be produced as evidence in court if the settlement talks do not succeed.

In Quebec, you cannot seize a person's or company's assets unless you have a court order or judgment and obtain a writ of seizure or execution. To obtain these, you need to take legal proceedings. A seizure can sometimes be obtained prior to obtaining a judgment but this is only in extreme cases where there is fraud or where the debtor is quickly making his assets disappear.

Generally the answer is no and you must take legal proceedings to claim the amounts owed you unless your contract provides otherwise. Exception made of certain goods, you can ask the cancellation of the sale and take back your goods if the sale was made without terms of payment, the goods are still in the possession of the purchaser and not more than thirty days have elapsed since the goods were delivered.

The best way to secure yourself is to have a written contract that clearly sets out the terms and conditions of sale. You may also include a provision that stipulates that you will remain the owner of the property until such time as you are paid in full. This stipulation is subject to certain requirements to be opposable to third parties, such as registration within a certain time and the goods sold remaining in the possession of the purchaser.

You can only claim interest on unpaid invoices if the contract clearly stipulates this. It is a good idea to clearly specify in your contract that interest shall be payable on unpaid amounts after a specific time period and the interest rate on an annual basis as well as to ensure that the contract is signed by the debtor. If your contract does not provide this, you can only claim interest at the legal rate of 5% per annum since the date of sending out the demand letter. You may also ask the courts that an additional indemnity be added to the legal rate. The additional indemnity is equal to the difference between the interest rate established pursuant to the provisions of the Quebec Income Tax Act and the legal rate (usually 2-3% more).

The delay which is called ''prescription'' or sometimes referred to in other jurisdictions as a ''statute of limitation'' varies depending on the nature of the obligation. In commercial matters it is generally of 3 years for contractual obligations. It is very important to verify the prescription delay as this may extinguish your rights if you do not take proceedings prior to the expiration of the prescription delay.

For civil matters, there is no jail time for the non payment of debts or obligations unless there is fraud. A collection agency cannot threaten you with jail if you do not pay the amounts they claim.

In Quebec you cannot claim the fees you pay to your lawyer for suing someone. There is a judicial tariff which provides specific amounts that you can claim. Generally the losing party is condemned to pay these to the winning party by the judge. Judicial fees generally represent a fraction of the actual fees that you pay to your lawyer. For instance, in most matters the judicial fees will be of $50.00 for a half day in court whereas your lawyer will cost much more!

Court costs are the filing fees, court stamp fees, bailiff fees, witness fees and stenographer fees that you incur in the course of legal proceedings. Generally the losing party is condemned to pay these to the winning party by the judge.

If you sold goods to this company in the last 30 days, you may be entitled to take them back. Otherwise you need to obtain a proof of claim and file this with the trustee. If any proceeds are left after the payment of the trustee fees, you may be entitled to a dividend but need to file a proof of claim to receive this dividend.

Bankruptcy is usually a last resort solution and should be used carefully. Putting someone in bankruptcy is a major step and one that is not done very often. It is often more advantageous to take legal proceedings and sue to obtain payment rather than putting someone in bankruptcy. Bankruptcy is normally used when a debtor is making preferential payments to his creditors, is disposing of his assets for little or no consideration and there are many creditors suing the debtor. There are costs of several thousand dollars to put someone in bankruptcy and these often need to be paid by the creditor starting the bankruptcy proceedings. In addition to this, you need to prove at least $1,000.00 in indebtedness and an act of bankruptcy. If the debtor does not have any assets or money then there is no advantage to put him in bankruptcy as there is nothing to collect and the bankruptcy will extinguish their debt.

Section 347 of the Criminal Code states that it is a criminal act to charge interest at an effective rate which exceeds 60% per year and an agreement which is contrary to the provisions of the Criminal Code is not valid. In addition to this, there are laws such as the Consumer Protection Act which limit or impose limits on the interest that can be charged.