Debt Collection in Canada

Canadian debt collection law is primarily provincial. The answers below focus on Ontario, which applies the broadest set of commercial principles broadly shared across Canadian common-law provinces.

Small Claims Court. For claims up to CAD 35,000 (Courts of Justice Act, RSO 1990, c C.43, s 23(1); O Reg 626/00, s 1(1)), this court offers a streamlined procedure designed to be accessible without a lawyer. Filing fees are modest, hearings move faster, and the simplified rules make it viable even for modest cross-border claims.

Simplified procedure. For claims between CAD 35,000 and CAD 200,000 (Rules of Civil Procedure, RRO 1990, Reg 194, s 76.02), the simplified procedure reduces discovery and pre-trial steps, cutting both time and cost. Parties with claims above CAD 200,000 may also elect this route by mutual agreement (s 76.02(3)).

Ordinary civil procedure. Required for claims at or above CAD 200,000 where the parties do not opt for the simplified route. This involves full discovery, pre-trial conferences, and trial. It is the most resource-intensive path but allows for the broadest remedies.

A demand letter is not mandated by the Rules of Civil Procedure, but some contracts require it as a condition precedent to litigation. Even where it is not required, it is good practice: it gives the debtor a final opportunity to pay, and a written acknowledgment of the debt in response resets the two-year limitation period under the Limitations Act (SO 2002, c. 24, s 13(1)).

Timelines in Canada are considerably shorter than in many civil-law jurisdictions. Indicative benchmarks for Ontario:

• Small Claims Court: typically 6–12 months from filing to judgment, depending on court scheduling.
• Simplified procedure: typically 12–24 months.
• Ordinary civil procedure: typically 2–4 years for complex commercial disputes.

Enforcement of a judgment adds time. Once judgment is obtained, the creditor must still collect from the debtor. Enforcement tools include garnishment of bank accounts or wages, a writ of seizure and sale of personal property, and examination of the judgment debtor. The sheriff's office administers enforcement in Ontario. For current fee schedules and enforcement forms, see the Ontario Ministry of the Attorney General: https://www.ontario.ca/page/court-enforcement.

Asset-freeze orders (Mareva injunctions) can be sought on an urgent basis even before a statement of claim is served. They are particularly valuable in cross-border cases where there is a credible risk the debtor will transfer assets out of jurisdiction.

Yes, with two main conditions to satisfy.

Jurisdiction: the real and substantial connection test. To bring a claim in Ontario, the creditor must establish that Ontario courts have jurisdiction over the dispute. The Supreme Court of Canada set out the governing framework in Club Resorts Ltd v Van Breda, 2012 SCC 17. A presumptive connecting factor is sufficient to establish jurisdiction prima facie: the debtor is domiciled or resident in Ontario; the debtor carries on business in Ontario; the tort or breach occurred in Ontario; or the contract connected to the debt was made in Ontario. Once a presumptive factor is proven, the burden shifts to the debtor to rebut it.

Security for costs. If the foreign creditor is not resident in Ontario and does not have sufficient assets in Ontario to cover a potential costs award, the defendant may bring a motion for security for costs. This can slow proceedings. To avoid this risk, foreign creditors should document their financial capacity early in the case.

No local attorney is legally required for Small Claims Court, but retaining one is advisable for claims above CAD 35,000. For larger proceedings, Canadian counsel is essential for navigating discovery and procedural rules.

The Law Society of Ontario's lawyer directory can be used to identify qualified commercial litigation counsel: https://lso.ca/public-resources/finding-a-lawyer-or-paralegal.

A judgment without enforceable assets behind it has limited immediate value. Canadian law provides several paths for creditors in this situation.

Examination of the debtor. After obtaining judgment, the creditor can require the debtor to attend a debtor examination and disclose all assets, income sources, and liabilities. Failure to attend or to answer truthfully is contempt of court.

Ongoing garnishment. A garnishment order can capture future income — including salary or payments from business customers — as it arrives. This is effective against debtors who have regular income but temporarily lack liquid assets.

Writ of seizure and sale. A writ filed with the sheriff binds any real property the debtor acquires in Ontario after the writ is registered. If the debtor later sells or mortgages that property, the creditor's claim is paid from the proceeds.

Insolvency proceedings. If the debtor is insolvent, the creditor may petition for bankruptcy under the Bankruptcy and Insolvency Act (RSC 1985, c B-3). Trade creditors rank as unsecured creditors and are paid after secured creditors and certain preferred creditors (such as employees). For the text of the Act, see: https://laws-lois.justice.gc.ca/eng/acts/B-3/.

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Q: Is there a minimum claim amount to use the courts in Canada?

A: There is no statutory minimum. However, court filing fees and attorney costs can exceed the value of very small claims. For Ontario Small Claims Court, the filing fee for a claim up to CAD 35,000 is around CAD 102–169 (2026 figures). Claims below CAD 3,000–5,000 may be better resolved through direct negotiation or a commercial debt collection agency.

Q: Can I enforce a foreign arbitral award against a Canadian debtor?

A: Yes. Canada is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Awards from Convention states can be recognised and enforced in Ontario under the International Commercial Arbitration Act, 2017, SO 2017, c 2, Sched 5. A court application to recognise the award is required before local enforcement proceedings can begin.

Q: What documents do I need to file a claim in Ontario?

A: For Small Claims Court, Form 7A (Plaintiff's Claim) is required. For simplified or ordinary procedure, a Statement of Claim is the initiating document. Supporting evidence should include: the contract or agreement, invoices, delivery records, correspondence showing the debt is due and unpaid, and any written acknowledgment of the debt by the debtor.

Q: Does Canadian law allow me to recover collection costs and legal fees from the debtor?

A: In Ontario, the successful party in ordinary civil proceedings is typically entitled to "costs" — a partial contribution to legal fees assessed by the court. In Small Claims Court, cost recovery is limited to 15% of the claim amount. Full indemnity for legal fees is rare and generally requires exceptional circumstances such as fraud or misconduct by the debtor.

Q: What if the debtor acknowledges the debt but asks for a payment plan?

A: Any written acknowledgment of the debt resets the two-year limitation period (Limitations Act, s 13(1)). A payment plan agreed in writing is enforceable as a contract. If the debtor defaults on the plan, the creditor can file suit on the original debt or seek enforcement of the settlement agreement directly.

Q: Can Quebec debtors be sued under the same rules as Ontario debtors?

A: No. Quebec operates under civil law (Code of Civil Procedure, CQLR c C-25.01), with different procedures, limitation periods, and enforcement mechanisms. The general principles described in this guide apply to common-law provinces. For Quebec-specific advice, specialist counsel admitted to the Quebec bar is required.