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Collecting after someone declares bankruptcy?
If someone owes me money and I go to Court to sue them and I win, can I still collect from them if they declare bankruptcy?
If you go to Court and are awarded a Judgement, then you can proceed to try to collect on that Judgment to the best of your ability, but if someone declares bankruptcy then you can no longer continue trying to collect on that debt.
As a background, if you get a Judgement from the court then you are considered a “Judgment Creditor”. This is just a legal term used to describe the situation where you have a piece of paper sanctioned by the court agreeing that you are owed money from the debtor. If the debtor does not pay you, then you can also ask the court for an Order for Seizure and sale of the debtor’s property. This means that as a creditor you have cause a bailiff to go to the debtor’s home and seize personal property which can later be sold to pay off the money that is owed. It also means that you can garnish the debtor’s income at their place of employment.
Unfortunately, if the debtor declares bankruptcy then you as a Judgement Creditor are affected by the Stay of Proceedings outlined under the Bankruptcy and Insolvency Act. This means that you cannot seize assets or garnish the debtor’s income. It also means that you rank as an unsecured creditor in the bankruptcy and are treated as though you did not have any special status along with the debtors other unsecured debts (credit cards, lines of credit, overdrafts etc.)
Even if the debtor is not bankrupt, as a Judgment Creditor you have certain collection limits to which you must adhere. In British Columbia a bailiff can only take enough property to satisfy the judgement owing. The BC Court Order Enforcement Act allows debtors to claim certain property as exempt and as such the bailiff will not be able to seize these exempt assets, even if there is still money owing. i.e. The bailiff must leave the exempt assets behind.
The Court Order Enforcement Act was designed to help debtors recover and re-establish themselves.
The lists of exempt personal assets considered exempt include (per person)
· - Equity in a principle residence up to $12,000 in the GVRD/CRD and $ 900 elsewhere
· - $10,000 in Tools of the Trade (what you use to earn an income, can include a car)
· - Household goods up to $4,000
· - Equity in a vehicle up to $5,000
· All necessary clothing and medical aids
Bailiffs are required to provide this information to debtors when seizing their assets. Debtors can take up to 48 hours to decide if they would like to claim their exemptions.
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