Creditors (the party owed the debt) can be secured or unsecured. A secured creditor holds security that will cover the amount the debtor (party owing the debt) owes. Alternatively, an unsecured creditor holds no such security.
In order to take advantage of legal mechanisms to enforce a debt, an unsecured creditor must first obtain judgment against the debtor (see civil litigation page). After judgment, the creditor can take steps to seize assets belonging to the debtor, and garnish the debtor's wages and bank accounts.
Alternatively, a secured creditor, i.e. a mortgagee, whose interests take precedence over an unsecured creditor, will not be required to obtain judgment in order to seize or sell assets which are subject to the debt. The proceeds realized through the sale are available to the secured creditors. Any balance left will be paid to any unsecured creditors.
Therefore, our advice to lenders is to take steps to secure a loan before advancing funds. A lender can secure its interest in various ways including by way of a registered land mortgage, a chattel mortgage with the proper registration under the Personal Property Security Act, and the Bank Act, etc.
If you have any questions about debt collection, including the security of a loan, please feel free to contact us with your query. We would be pleased to discuss the matter with you and offer an initial consultation free of charge.