debt recovery process in Ontario

The debt recovery process in Ontario typically involves four stages: sending a formal demand letter, attempting negotiation or mediation, commencing court proceedings (Small Claims Court for claims up to $50,000, Superior Court for larger amounts), and enforcing any judgment through garnishment or seizure. The Limitations Act, 2002 gives creditors two years from discovery to act.

When someone owes you money and stops paying, it can feel like a dead end. Many creditors, businesses and individuals alike, never pursue unpaid debts simply because they don't know where to start. The good news is that Ontario has a well-defined legal framework for how to recover a debt in Ontario. The less comfortable truth is that time limits and procedural steps matter enormously.

This guide walks through the complete debt recovery process in Ontario from a creditor's perspective, from the moment a debt goes unpaid through to collecting money after a court judgment. It is intended as a practical overview, not legal advice. The specifics of your situation may affect which steps apply and in what order.

Step 1: Confirm the Debt and Check the Limitation Period

Before spending any time or money on collection, do two things: confirm the amount owed and check how much time you have left.

Know Your Limitation Deadline

Under section 4 of the Limitations Act, 2002, you have two years from the date the claim was discovered to commence legal proceedings. "Discovered" generally means the date you knew, or reasonably ought to have known, that the debt existed and was not being paid.

In practice, the two-year clock usually starts running from:

The date of the first missed payment
The date of the debtor's last payment or written acknowledgement of the debt
The contractual due date, if there is one

A written acknowledgement of the debt, even an email, can reset the clock. So can a partial payment. But a demand letter from you does not pause or reset the limitation period. If you send a demand letter and wait, the clock keeps running.

There is also an ultimate limitation period of 15 years (Limitations Act, 2002, s. 15). After 15 years from the original act or omission, the debt is generally unenforceable regardless of when it was discovered.

Practical step: Before doing anything else, identify the date of the last payment or first default and calculate your deadline. If you are within a few months of the two-year mark, consult a lawyer promptly. There are situations where the limitation period may run differently, for example where the debtor is a minor or where fraud was involved.

Confirm the Amount Owed

Gather your supporting documents: invoices, contracts, written agreements, emails confirming the debt, and records of any partial payments. You will need these if the matter goes to court.

Step 2: Send a Formal Demand Letter

A demand letter is a written notice to the debtor stating the amount owed, the basis for the debt, and a deadline for payment. It is the standard first step in the Ontario debt collection process and often resolves matters without court involvement.

What to Include in a Demand Letter

A well-drafted demand letter should cover:

The amount owing, broken down clearly (principal, interest if applicable)
The basis of the debt: invoice numbers, contract dates, or agreement references
A payment deadline: 10 to 14 days is standard and considered reasonable by courts
Consequences of non-payment: a statement that you will commence legal proceedings if the deadline passes

Why It Works

The majority of civil disputes in Ontario resolve before reaching trial. A formal demand letter, particularly one drafted by a lawyer, puts the debtor on notice that you are serious, creates a paper trail, and often prompts payment or opens a negotiation.

A lawyer-drafted demand letter carries more practical weight than one sent directly by the creditor. It signals that you have already engaged legal counsel and are prepared to proceed.

The Limitation Period Warning

This cannot be overstated: a demand letter does not stop the limitation period. If the debtor ignores your letter, you must still commence legal proceedings within the two-year window. Waiting to see if the debtor responds, month after month, is a common and costly mistake.

Step 3: Attempt Negotiation or Mediation

If the debtor responds but disputes the amount or cannot pay in full immediately, negotiation or mediation may resolve the matter faster and at lower cost than litigation.

Negotiation

Direct negotiation might produce a payment plan (scheduled instalments), a partial settlement (lump sum less than full amount in exchange for full release), or a structured repayment agreement with security. The right outcome depends on the debtor's financial situation and your own priorities.

Mediation

Mediation involves a neutral third party who helps both sides reach a voluntary resolution. It is confidential, generally less adversarial than court, and can preserve a business relationship. Some commercial contracts include mandatory mediation clauses; check your underlying agreement before proceeding to litigation.

When to Skip ADR

Alternative dispute resolution is not always the right step. If the debtor is unresponsive, appears to be insolvent, or is clearly acting in bad faith, moving directly to court may be more efficient. A lawyer can help you assess whether negotiation is likely to produce a result.

Step 4: Choose the Right Court

The court where you file depends on the amount you are claiming. Getting this right matters, as filing in the wrong court can affect costs and procedure.

Ontario Small Claims Court (Claims Up to $50,000)

As of October 1, 2025, Ontario's Small Claims Court handles claims up to $50,000, excluding interest and costs. This is the most practical option for most individual and small business debt recovery claims.

Small Claims Court is designed to be accessible. The procedure is simpler, there are fewer preliminary steps, and the process moves faster than Superior Court. Self-represented parties are common, though legal help is advisable for any claim of significant value.

The standard process at Small Claims Court is:

Plaintiff files a Plaintiff's Claim (Form 7A)
Defendant is served and has 20 calendar days to file a Defence
If no Defence is filed, the plaintiff may obtain default judgment
If a Defence is filed, a mandatory Settlement Conference follows (confidential, before a judicial officer)
If not resolved, the matter proceeds to Trial

The settlement conference is an important feature. A judicial officer listens to both sides, shares their view of the likely outcome, and encourages resolution. Many matters settle at this stage.

Ontario Superior Court of Justice (Claims Over $50,000)

For claims exceeding $50,000, you must file in the Ontario Superior Court of Justice. The process is more formal and complex:

File a Statement of Claim setting out the full particulars of the debt
The defendant has 20 days to serve and file a Defence
The matter proceeds through documentary discovery, potentially examinations for discovery, a pre-trial conference, and eventually trial
Filing fees range from approximately $108 to $229 depending on claim amount

A Simplified Procedure is available for claims under $200,000, which reduces some discovery steps. Legal representation is strongly advisable for any Superior Court action.

Step 5: Commence Legal Proceedings

Once you have chosen the correct court, the filing process is straightforward, though precision matters.

For Small Claims Court, file a Plaintiff's Claim (Form 7A) at the court office. The claim must set out who you are, who owes you money, the amount claimed, and the basis of the claim.

For the Superior Court, file a Statement of Claim using the appropriate civil court forms. The claim must be detailed enough to put the defendant on full notice of what is being alleged.

After filing:

You must serve the defendant within six months (personally, by mail, or by courier as permitted)
File a Proof of Service once service is complete
If the defendant does not file a Defence within 20 days, you may move for default judgment (a judgment in your favour without a trial)
If the defendant files a Defence, the matter continues to settlement conference or trial

Default judgment is a significant and often underused tool. If the debtor simply ignores the claim, which happens, default judgment allows you to proceed directly to enforcement without a trial.

Step 6: Obtain a Judgment

A court judgment is a formal order stating that the debtor owes you a specified sum, plus pre- and post-judgment interest and sometimes a contribution to costs.

Judgments are obtained in two ways:

Default judgment where the defendant did not respond within the required time
Judgment after trial where the matter was heard and decided by a judge

Under section 16(1)(b) of the Limitations Act, 2002, a judgment is enforceable for 20 years from the date it becomes final. This means you have significant time to pursue enforcement if the debtor cannot pay immediately.

It is important to understand that a judgment is not the same as payment. Many creditors are surprised to discover that winning in court is only half the work. If the debtor does not pay voluntarily, you must take additional steps to enforce the judgment.

Step 7: Enforce Your Judgment in the Debt Recovery Process in Ontario

Enforcement is often where the real work happens. Creditors have several tools available, and the right combination depends on the debtor's circumstances.

Debtor Examination (Examination in Aid of Execution)

If you do not know what assets or income the debtor has, you can compel them to attend a court hearing under oath. At this examination, the debtor must disclose:

Their employment and income
Bank accounts and financial assets
Real property ownership
Any transfers or dispositions of assets

This examination gives you the information you need to choose the most effective enforcement method. It is often the logical first step after obtaining judgment.

Wage Garnishment

File a Notice of Garnishment (Form 20E) with the court. The garnishment order goes to a third party, typically the debtor's employer or bank, directing them to pay money to you rather than to the debtor.

Under Ontario's Wages Act, R.S.O. 1990, c. W.1, wage garnishment is capped at 20% of net wages. Bank account garnishment captures all funds held at the time the notice is served.

The full post-judgment enforcement guide from Ontario Courts provides step-by-step instructions for each enforcement method.

Writ of Seizure and Sale of Personal Property

A writ authorises the sheriff to seize and sell the debtor's personal property. However, Ontario's Execution Act, R.S.O. 1990, c. E.24 and its regulations protect certain categories of assets from seizure, including:

Necessary clothing of the debtor and dependants
Household furnishings and appliances up to a prescribed value
One motor vehicle up to a prescribed value
Tools and equipment essential to the debtor's trade or occupation up to a prescribed value

The prescribed exemption amounts are set out in Ontario Regulation 657/05 and are updated periodically. Always verify current figures before relying on specific amounts, as they change over time.

Writ of Seizure and Sale of Land

A writ against land is filed with the sheriff and registered on the property's title through Teranet. Once registered, the debtor cannot sell or mortgage the property without satisfying the judgment. This is particularly effective where the debtor owns real estate.

A Note on Insolvency

If the debtor is insolvent or has filed for bankruptcy, civil enforcement proceedings in Ontario may be stayed under the federal Bankruptcy and Insolvency Act. In that case, your claim becomes part of the bankruptcy process and is governed by federal law rather than Ontario civil procedure. A lawyer can advise whether enforcement is still feasible in that situation.

Commercial vs. Consumer Debt: Creditor Rights in Ontario

Understanding whether you are dealing with commercial or consumer debt affects which rules apply and how you should approach collection.

Commercial Debt (Business-to-Business)

Commercial debt arises between businesses: unpaid invoices, service agreements, commercial leases, equipment financing, and business loans. It typically involves:

Larger amounts and more complex underlying contracts
Payment terms, interest provisions, and dispute resolution clauses negotiated in the original agreement
Less regulatory oversight of collection activity. The Collection and Debt Settlement Services Act (CDSSA) applies to registered third-party collection agencies, not to a business collecting its own debt

In commercial debt recovery Ontario businesses can draw on contract terms (late payment interest, indemnification clauses), credit reporting (where applicable), and the debtor's interest in preserving the business relationship.

Consumer Debt

Consumer debt involves an individual owing money to a creditor. When a third-party collection agency is involved, the CDSSA imposes strict rules:

Contact is restricted to 7:00 a.m. to 9:00 p.m., Monday through Saturday, and 1:00 p.m. to 5:00 p.m. on Sundays
After initial contact, an agency cannot contact the debtor more than three times in a seven-day period without consent
Agencies cannot threaten legal action without the creditor's prior written authorisation
Debtors may send a formal cease-and-desist letter, which effectively requires the agency to take the matter to court before resuming collection activity

Note that these CDSSA restrictions apply to registered third-party collection agencies, not to the original creditor collecting directly.

Frequently Asked Questions: Debt Recovery Process in Ontario

How long do I have to collect a debt in Ontario?

You have two years from the date the claim was discovered to commence legal proceedings (Limitations Act, 2002, s. 4). After that, the right to sue is generally lost. A debtor's written acknowledgement of the debt or a partial payment can reset the clock. The ultimate limitation period is 15 years.

What is the Ontario Small Claims Court limit?

As of October 1, 2025, the Ontario Small Claims Court handles claims up to $50,000, excluding interest and costs. Claims above $50,000 must be filed in the Ontario Superior Court of Justice. The previous limit was $35,000 before the October 2025 amendment.

What happens if a debtor refuses to pay after I win in court?

You can enforce the judgment through wage garnishment, writs of seizure and sale of personal property or land, or a debtor examination to locate assets. A judgment is enforceable for 20 years under the Limitations Act, 2002, so you are not without options even if enforcement takes time.

Do I need a lawyer to recover a debt in Ontario?

Not necessarily. Small Claims Court is designed for self-represented parties. That said, legal representation is strongly advisable for claims over $50,000, for commercial debt recovery involving complex contracts, or where the debtor is likely to contest the claim aggressively. A lawyer can also assess collectibility before you invest in litigation.

Can a creditor garnish wages in Ontario?

Yes. Once you have a judgment, you can file a Notice of Garnishment to direct the debtor's employer to pay a portion of their wages to you. Ontario's Wages Act limits wage garnishment to 20% of net wages. Bank accounts can also be garnished.

Sources & Official Resources

Ontario Statutes Cited

Ontario Regulations Cited

Ontario Regulation 657/05, Execution Act Exemption Amounts

Court Resources

Contact Hadri Law

If you are owed money and are not sure where to start, or where you stand, Hadri Law can help. Nassira El Hadri, Founder and Principal Lawyer, spent over four years in heavy equipment finance focused on secured and unsecured debt recovery across Canada before founding the firm. That background translates directly into practical, strategic guidance for creditors navigating the debt recovery process in Ontario.

Whether you need a demand letter, advice on which court to use, or representation through enforcement proceedings, Hadri Law offers a free initial consultation.

Call (437) 974-2374 or book directly at calendly.com/hadrilaw/free-consultation.

We serve clients in English, French, Spanish, and Catalan.

This post is for informational purposes only and does not constitute legal advice. Consult a lawyer about your specific situation.