JUDGMENT RENDERED: WHAT’S NEXT?

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JUDGMENT RENDERED: WHAT’S NEXT?

A debtor owes you a significant sum of money, and resorting to the courts seems inevitable to recover what is owed to you. However, the success of this process depends in part on the diligence you put into preparing your recourse.

Whether the debtor is a legal entity or an individual, it is important to determine their solvency before pursuing legal action. ‘In case of doubt, the creditor should consider the services of a professional who will investigate the debtor’s assets and liabilities before anything else,’ warns Attorney Jérome Kara-Godin from La Boîte juridique.

Choices

The goal of initiating legal action is to obtain repayment of the debt, but there are mechanisms that can help certain creditors optimize their chances of being repaid, such as the legal mortgage resulting from a judgment, the legal mortgage of the person who participated in the construction or renovation of a building, and the conventional mortgage to secure the performance of obligations arising from a lease or to guarantee a loan, for example. These will allow these creditors to be paid in priority over other creditors without a mortgage.

In the case of a construction contractor, the contractor must register a mortgage on the property to guarantee payment for their work, which will be preserved through certain steps to be taken within the specified deadlines. However, it should be noted that mortgage claims will be repaid after priority claims, such as state claims for amounts due under certain tax laws.

Voluntary or forced

You have obtained a favorable judgment? Congratulations. It remains to be seen whether the recovery of your debt will be done amicably or forcefully. The debtor usually has 30 days to comply voluntarily. If they do so within this period, the matter will end there.

On the other hand, if the debtor is facing financial difficulties or wants to give you a hard time, you will likely have to proceed with forced execution. ‘You can then retain the services of a lawyer who will coordinate the steps to seize the debtor’s assets (real estate, vehicles, etc.). In some cases, there may even be a third-party seizure, such as seizing part of the debtor’s salary.’

This will be followed by the sale of assets and the distribution of the proceeds from the sale and/or the seized amounts. Subsequently, the co-location statement must be prepared, which proposes the order in which the claims will be repaid and is of great importance when there are multiple creditors. ‘In the case where the debtor owes $200,000 to the tax authorities and the balance in a mortgage, you increase your risk of ending up empty-handed if you have no mortgage,’ warns the lawyer. ‘However, if you have a judgment, it will still be valid for 10 years, allowing you to exercise your right later when the debtor’s financial situation is restored.

Can it be avoided?

Sometimes, a debtor restarts their business under a different name to circumvent their creditors. However, this does not necessarily protect them, but recovering your claim will become more complicated. ‘A creditor who suspects this type of misconduct can request the lifting of the corporate veil or argue that the new business is the alter ego of the old one. In the case of a judgment against a legal entity, a new action could, for example, be brought against the shareholder or the new business, provided that they can demonstrate to the court their intention to challenge the judgment,’ he points out.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.