What Happens If You Lose A Lawsuit And Can’t Pay In Canada?

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Lisa Rennie
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Lisa has worked as a personal finance writer for over a decade, creating unique content to help educate Canadian consumers. Expertise:
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Updated On: August 21, 2025
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Losing a lawsuit is not only stressful and time-consuming, but it can cost you a pretty penny. Depending on the case, you could be out hundreds or even thousands of dollars. But what happens if you lose a lawsuit and can’t pay in Canada? 

Read on to find out what options you may have if you can’t pay your settlement, and the potential consequences you could face if you don’t fulfill your legal obligations.


Key Points:

  • If you lose a lawsuit in Canada and can’t pay, the creditor can enforce the judgment through wage garnishment, asset seizure, or property liens.
  • To help cover the cost of litigation, you can consider financing options, such as personal loans or lawsuit loans.
  • If you’re required to pay a settlement, be sure to pay on time, keep accurate records, and get a written release from the other party acknowledging that you’ve made your payment.

What Happens If You Lose A Lawsuit And Can’t Pay In Canada?

If someone successfully sues you, you’re required to pay the settlement amount in the judgment within a certain amount of time following the completion of the court case. But what if you don’t have enough money to cover your required payment?

Here are some general ways you may be penalized if you can’t pay your lawsuit. The consequences may differ depending on where you live.

Your Wages May Be Garnished

If you don’t have the funds readily available to pay the plaintiff, payment can come from your income via wage garnishment. That means a certain amount of money will be deducted from each paycheque until your settlement is paid in full. 

However, depending on where you live, you may be protected from this type of collection method. 

You Can Be Charged Interest 

You’ll have a specific amount of time to make your payment according to the details of the court case. If you don’t make the payment when it’s due, you could wind up owing more. That’s because post-judgment interest may be added to the original amount owing.

Your Property May Be Seized

As a last resort, your property may be seized and sold. The proceeds will then be used to satisfy your payment. 

What Is A Voluntary Deposit To Avoid Seizure?
To prevent your assets from being seized, you can voluntarily repay the creditor to satisfy what you owe. Taking a proactive step can help you avoid the unfortunate circumstance of losing your property or other valuable assets and avoid bankruptcy.

A Collections Agency May Go After You

If you don’t pay the plaintiff or creditor right away, they may hire a collection agency to come after you for unpaid dues. This can lead to unnecessary stress and may potentially impact your credit scores.  


What If You Can’t Pay A Lawsuit? 

If you don’t have enough money to make a full payment at once, you have a couple of options:

Take Out A Personal Loan

With a personal loan, you can use the funds from the loan to satisfy your debt. Then, you can repay the loan through smaller installment payments over a longer period of time. This way, your lawsuit debt is taken care of, and you won’t have to come up with the entire amount upfront.

Keep in mind that you will have to pay interest on the loan, which means you’ll be paying more in the long run. The lower the interest rate, the less you’ll have to pay over the loan term. 

Pro Tip:
To secure a lower rate, having good credit is beneficial. Before applying for a personal loan, check your credit score for free using Loans Canada’s CompareHub. Knowing your score before you apply for a loan will give you a good idea of the type of rate you may qualify for.

Negotiate With the Plaintiff

Negotiation can be a practical option if you don’t have the funds to cover the settlement. In this case, you could do one of the following:

  • Propose a payment plan to the plaintiff
  • Offer a lump-sum settlement for less than the full amount
  • Request a delay due to financial hardship

What About Lawsuit Loans?

Also referred to as pre-settlement funding, a lawsuit loan is a financial tool offered to plaintiffs pursuing legal action against a person or business, typically when they expect a favourable outcome. These types of loans are designed to help cover living expenses, medical bills, or legal costs during the litigation process.

Unlike traditional loans, repayment is only required if the case is won. These loans are especially common in personal injury, employment disputes, and civil rights cases, where plaintiffs might not be able to work and earn income while awaiting a settlement.

Keep in mind that this financing option is available in the event that you win the case, as mentioned. So, it might not make sense in a situation where you lose the case and are required to pay out a settlement.

Learn more: What Are Lawsuit Loans?


How To Pay A Lawsuit In Canada

For the most part, you can pay the other party the settlement via cash, bank transfer, money order, bank draft, or credit card. The payment options may vary depending on the court and the province the case was held in. 

OntarioIn Ontario, you can pay with cash, money order, or bank draft, and deposit your payment with your bank, along with the necessary documents from your lawsuit.
QuebecIn Quebec, you can pay with cash, debit card, credit card, or certified cheque in person at the courthouse. You can also pay online, or send your payment through the mail by certified cheque or money order. 
AlbertaIn Alberta, you can only pay into the court or directly to the plaintiff.

You’ll need to find out exactly how your settlement can be paid based on where you live. When paying, ensure you keep records and proof of payment. 

Tips On Paying Your Settlement 

When settling your payment, keep the following tips in mind to protect yourself:

  • Pay on time. If possible, try to pay your settlement in full when it’s due. That way, you can avoid interest charges or more severe consequences for late payment.
  • Keep records. Retain all receipts and documents that prove your settlement payment is made in case the plaintiff mistakenly comes after you to collect on funds you’ve already paid.
  • Obtain a release from the other party. A release or acquittance is a document proving that the other party acknowledges that you have made your payment according to the judgment.
  • Inform relevant parties of your payment. Give a copy of your payment receipt or stamped document to other parties involved, including the court office. You may not be required to inform others, but it’s a good idea to inform them anyway.

What Happens If You Disagree With The Judge’s Hearing?

If you feel that you’ve been unfairly sued, you may consider appealing your case. However, this may not be possible in all cases or provinces.

For instance, in Ontario, you may appeal your Small Claims Court case decision in Divisional Court if the claim is for over $3,500. In this case, you must appeal within 30 days of the judge’s original decision. But in Quebec, a small claims judgment cannot be appealed. You will have to pay the amount owed within the time specified in your case. 

Find out what your options are in terms of appealing your case if you disagree with the judge’s decision based on the province or territory that you live in. If you are permitted to appeal your case, remember, there are usually fees involved for filing your appeal. 


Final Thoughts

If you’re wondering what happens if you lose a lawsuit and can’t pay, you’ll be happy to know that there are a couple of options available. You must adhere to the requirements of the court outcome, and that includes paying your settlement when it’s due. But if you can’t come up with the funds on time, there are loans and other arrangements that you may be able to work out with the court or creditor.


FAQs

How much are lawyer fees in Canada?

It can cost as little as $90 per hour for help from a law clerk or law student, to up to $405 per hour for a senior lawyer’s help. Generally speaking, lawyers are usually only required for a few hours of consulting to help prepare a small claims court case. Defendants usually represent themselves in small lawsuits, as the process is usually relatively simple. But in some cases, spending a few hundred dollars to consult with a lawyer can help ensure that you are adequately prepared to represent yourself in court. 

Can I appeal my case to the Supreme Court of Canada? 

If you want to appeal a civil court case decision to the Supreme Court of Canada, you must ask the Supreme Court for permission, or “leave.” You will need to apply for leave to appeal before the appeal is heard. However, keep in mind that very few of the appeals made are granted by the Supreme Court. So ensure your cause is worth fighting for before making an appeal.

Can I borrow money or get a loan to settle a lawsuit?

Yes, you can take out a personal loan to cover your lawsuit settlement. Otherwise, if you feel that you will win the lawsuit, you can consider a lawsuit loan to cover legal fees, as well as other bills you might not be able to pay throughout a long and drawn-out court case. 

Can creditors take my CPP or EI if I lose a lawsuit?

CPP and EI benefits are typically protected from seizure by creditors, though they may be taken to cover things like government debts or family support.

Can I settle a lawsuit debt for less than what is owed?

Yes, creditors may agree to a reduced settlement or structured payment plan if negotiated.
Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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