A common fear among consumers owing monies to creditors is that they are going to be sued.
It is not possible to predict with scientific accuracy if one of your creditors is going to sue you over an unpaid account. There are, however, some guideposts that point to whether or not you are more likely or less likely to be sued. These guideposts are based upon my three decades in both the debt collection and debt relief industries.
These observations apply to medium-sized and large creditors. They do not necessarily apply to a very small creditor.
Your creditor might be tempted to sue you in two circumstances. Firstly, where obtaining a judgment against you would enable it to place a lien on your real property. And secondly, where obtaining a judgment would enable it to successfully recover monies from you by means of a wage garnishment.
1. Your creditor will be reluctant to sue you if the relevant limitation period has expired
Your creditor will be adverse to suing you if, due to the passage of time, the relevant limitation period in your province in connection with your debt has expired.
The remainder of this article assumes that the relevant limitation period on your unpaid account has not expired.
2. Creditors will not sue you for small amounts
Creditors do not sue consumers in circumstances where the outstanding balance is under $2,000.00 or $3,000.00. It is simply not cost-effective for creditors to sue consumers on accounts with balances this low. Over a period of several months or years, however, due to accruing interest and an increase in the outstanding balance, a creditor might decide to sue an unpaid account it originally considered too small to sue.
It is much more difficult to predict whether or not your creditor will sue you if you owe more than $3,000.00. There are significant differences amongst financial institutions in terms of how aggressive they are when it comes to suing consumers with balances exceeding $3,000.00. Some financial institutions have a reputation for routinely suing consumers owing as little as $5,000.00.
3. Debt buyers might be more willing to sue you than your original creditor
If your unpaid account has been purchased by a debt buyer--and the relevant limitation period has not expired on your account--then the odds of you being sued may increase. Your debt buyer will likely have paid a few cents on the dollar on your account. Accordingly, your debt buyer has a greater financial incentive to sue you than your original creditor.
4. Creditors are much more likely to sue you if you own real property
If you owe more than $3,000.00 to your creditor and you own real property in your own name then there is a real possibility that your creditor might sue you. The greater the amount of money that you owe to your creditor, the greater the odds that your creditor will sue you. All your creditor has to do is sue you, obtain a judgment against you, and place a lien on your real property. Your creditor will then receive its monies--plus post-judgment interest--when you either refinance your property or sell it.
5. Creditors are much less likely to sue you if you do not own real property
If you do not own real property in your own name, however, your creditors are much less likely to sue you.
The remainder of this article assumes that you do not own real property in your own name.
6. You might be more likely to be sued if you have a great job
If you have a high-paying job and you are not likely to quit your job if your wages are garnisheed then there you are more likely to be sued. This might include someone with a good job in government, academia, health care, or a high-paying union job.
Creditors are reluctant to sue debtors who are willing and able to quit their job to terminate a wage garnishment. There is, for example, plenty of demand for dental hygienists. If you are a dental hygienist and your judgment creditor sends a garnishment notice to your employer then you could simply quit your job and go work for another dental office.
7. Your creditor might be reluctant to sue you if it cannot recover monies from you by
means of a wage garnishment
Each province has a law limiting the amount of monies available to judgment creditors seeking to recovers monies from a judgment debtor by way of a wage garnishment.
Accordingly, here are a number of scenarios where a creditor will be reluctant to sue a debtor:
You are paying child support under a court order
You have already been sued by creditors
You owe a significant amount of monies to your creditors
You are currently unemployed
You support yourself on social assistance
You support yourself on pension income
Here is a brief YouTube video in which I address the issues of the likelihood that your creditor will sue you.
In this brief YouTube video former collection agency lawyer Mark Silverthorn describes the key criteria a creditor utilizes when deciding whether or not to sue a consumer over an unpaid account.
During my twelve years as a collection lawyer I managed the Legal Departments at some of Canada's largest collection agencies.
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