Looking to better understand what is a business debt collection and how it works?
You have clients owing you fees or money and you are looking to collect your aging account receivables?
Perhaps you are looking to find out more information about the business debt collection process in the Province of Quebec.
We have good news, you are at the right place!
In this article, we discuss the business debt collection process in detail. What debt can your business collect, the delicate process of deb collection for businesses, the court jurisdictions in the Province of Quebec and why you stand to gain in dealing with business debt collection lawyers.
This article is divided as follows:
- What Debt Can Your Business Collect?
- Business Debt Collection Is A Delicate Process
- How Does Business Debt Collection Work?
- Business Debt Collection Court Jurisdiction
- Arbitration
- Dealing With Business Debt Collection By Lawyers
- Takeaways
Let’s get started!
What Debt Can Your Business Collect?
Running a business means that you will have good clients who pay you well and other clients who default on their payment and become delinquent payors.
This is a normal part of doing business.
If you have rendered services, shipped a product or provided value to a buyer, a purchase or a client, then you should expect that they pay you for your product or services.
If your client or customer has not paid you for your products and services, eventually, that’s a debt that you can collect.
Any type of business debt can be collected such as:
- Fees for services rendered
- Purchase price of a product
- Development service fees
- Reimbursement of costs
- Reimbursement of out-of-pocket expenses
- Consulting and advisory fees
- Rent or property related debt
- Business loan
- Shareholder advance
The list can go on and on.
If your business is owed money, that’s a debt that can be collected.
Of course, there are various legal considerations to take into account such as the contractual agreements related to the money you are claiming or the application of any legal regime.
A business debt recovery lawyer can guide you in this process and will be an important ally to your business.
Business Debt Collection Is A Delicate Process
The debt collection is a delicate process for businesses.
It may not be a straightforward decision to pursue a client, a supplier, a distributor, a partner or anyone another business party to collect what is owed to you.
You have a relationship with them and that plays an important factor.
They have brought you a good stream of business over the years and that’s something you need to think about.
Perhaps they are going through a financial slump and their inability to pay results from factors over and above what they can control.
Insolvency, bad faith, invoice dispute?
There are many variables that can affect the collection of your entitlements.
No matter the reason, as a business, you need to evaluate your options and see what you can collect.
One the one hand, you want to preserve your business relationship and on the other hand you need to run your business and be profitable.
How Does Business Debt Collection Work?
Business debt and the collection of unpaid accounts will follow a typical pattern.
Service is rendered or product sold
Initially, there is a service that is rendered or a product delivered on credit.
In other words, as a gesture of good faith or based on a commercial decision, you decided to provide valuable services or offerings to your other business party.
Invoices sent and no payment received
The invoices are sent to your contracting party, client or customer and you did not receive any meaningful response.
You have clearly outlined what is owed to you in your invoice and your client either fails to acknowledge receipt of your invoice or perhaps fails to respond at all.
Client delays payment
On some occasions, your client receives your invoice and responds back asking for additional clarification or disputing parts of your invoice just to delay the payment process and win time.
You know that they are doing that specifically to delay the payment process and their invoice dispute is not justified.
Nonetheless, you provide the information your client needs to pay you and still, no payment.
You send emails, no response.
Perhaps your client responds back to finding some outrageous reason that you failed to respect your side of the bargain and that’s why they are not going to pay you.
Your company executives get involved and still no payment
You continue your pressure tactics and the matter goes to your head of finance, executives or president.
They attempt to speak to their counterparts, executive sponsors or your client’s key stakeholders and they get the runaround and ultimately no payment.
Your company tries to exercise all political or relational influence on your client to have them pay, but still you fail to get paid for your product or services.
By this time, your account receivable aging may have reached 90, 120 or 150 days!
You can’t afford to let this go so you now need to find a business debt collection lawyer to help you out.
Retain the services of a debt collection law firm
This is when you transition from your internal debt collection activities to engaging a debt collection lawyer or a debt collection law firm to legally pursue your delinquent account.
A debt collection law firm will typically send a formal and final notice to your client or customer asking them to settle their debt within a short period of time.
If they fail to do so, they are notified that you will file legal proceedings for the collection of your account in the applicable jurisdiction.
Judgment from the court
Once the case is tried, the court will render a judgment legally awarding you the sums you are entitled to.
Once the judgment is rendered, you will then be able to execute the judgment against the defaulting party’s assets and property.
That’s the legal execution of a judgment.
Debt collection lawyers have all these laws in their collection toolbox to be able to support you.
Business Debt Collection Court Jurisdiction
Businesses can collect their debt and seek the assistance of the court in the most relevant jurisdiction.
In the Province of Quebec, the Code of Civil Procedures provides for the jurisdiction of the courts.
Jurisdiction of the Superior Court of Quebec
The Superior Court is the court of general jurisdiction.
In other words, it has the competence to hear any case that is not specifically and exclusively assigned by law to another jurisdiction or adjudicative body.
Business debt exceeding the amount of $85,000 will be in the jurisdiction of the Superior Court of Quebec.
The Superior Court can hear any type of debt collection case and ancillary demands provided the value exceeds $85,000.
Jurisdiction of the Quebec Court
The Quebec Court will have jurisdiction over the matters the law has specifically assigned to it.
In the case of collecting debt in general and a business debt under $85,000, the Quebec Court will have jurisdiction.
The Quebec Court will have jurisdiction to hear the matter, including lease resiliation matters, along with any ancillary requests such as demanding specific performance of a contractual obligation will all be managed by the Quebec Court.
The caveat is that if there is a cross-demand or an amendment to your application that results in the value of the claim exceeding $85,000, then the debt collection lawsuit will need to be transferred to the Superior Court of Quebec.
Small Claims Court in Quebec
If you have a sum of money owed to you and the value is below $15,000, you can present that to the small claims court.
An application for the recovery of your debt can be made provided the capital owed to you, excluding interest, does not exceed $15,000.
A company or business entity will not be eligible for small claims if the business had over 10 employees bound to it under an employment contract for a period of 12-months preceding the date your application has been filed.
In some cases, if you pursue a person or entity who is eligible for small claims, then the case may be transferred to the small claims division of the court.
Territorial Jurisdiction of the Courts
The territorial jurisdiction is outlined in the Code of Civil Procedures where the law assigns a business debt collection lawsuit to a specific court located in a specific territorial location.
Territorial jurisdiction according to law
Your debt collection lawsuit will need to be commenced before the court where the defendant is domiciled or the location of any defendant if there are more than two defendants.
Territorial jurisdiction based on plaintiff’s option
The Code of Civil Procedures also allows you to file your business debt collection lawsuit as follows:
- Before the court of the place where the contract was made
- If your claim is found upon extracontractual liability, your action can be brought before the court where the injurious act or omission occurred
- If the action involves an immovable property, then the action can be taken before the court of the place where the property is situated
Contractual designation of territorial jurisdiction
The parties can also elect a territorial jurisdiction of a specific court in their contract.
In most business contracts, the parties will negotiate a clause where they select the governing law and venue.
If such a clause is negotiated int the contract, that could be a place where your debt collection lawsuit can be brought forward.
Arbitration
If you signed a contract where you mutually agreed to bring all sources of dispute before a designated arbitration center, then your debt collection action will need to respect the terms of your contract.
No matter the court jurisdiction or contractual obligations, a business debt collection lawyer will help you navigate these complexities so you can file your lawsuit in the jurisdiction that will give the most political and legal power as possible.
Dealing With Business Debt Collection By Lawyers
With the help and assistance of a business debt collection lawyer, you can define a collection strategy that will take into consideration the delicate balance between running your business and preserving your relationships.
A savvy debt collection lawyers will know when to negotiate, when to press hard and when to fire a legal action.
You should select your business debt collection lawyer based on their level of experience in dealing with collection-related matters.
Some lawyers will work on an hourly basis and others will consider the overall nature of your case and assess if a contingency based mandate can be considered or other types of legal service fee structuring.
Takeaways
Most of the time, collecting your money owed to your business is pretty straightforward.
You render your services or deliver your product and get paid.
In some other cases, your clients or customers fail to pay leading you to consider active business debt collection strategies.
We understand that your business debt collection is a delicate process.
You need to preserve your business relationship while at the same time you need to get paid.
You do not want to continually extend credit to your clients and there will come a time where an aging account receivable will need to be collected.
In this article, we discussed the business debt collection process, the court jurisdictions and why you should work with a business debt collection lawyer.
Should you need any debt collection services or speak to debt collection lawyers, our law firm is here to support you.
We are located in the Province of Quebec and can execute a judgment against any defendant or property located in this Province.
Contact us at any time, we will do our best to help you collect your account.
