Co-signing a loan, lease, or other financial agreement carries significant legal responsibility. A co-signer is not simply a reference or supporter—they are legally responsible for ensuring the agreement is fulfilled. If the primary borrower fails to meet their obligations, the co-signer becomes legally liable for the debt.

In Ontario, when a co-signer fails to uphold these obligations, creditors, landlords, or even the primary borrower may need to take legal action to recover money owed. Small Claims Court is often the most practical venue for pursuing recovery, especially with upcoming changes to its monetary limit. Tim at MTS Paralegal Services provides skilled representation in these matters, ensuring clients understand their rights and obligations under Ontario law.

The Legal Role of a Co-Signer

A co-signer assumes joint liability for the agreement from the moment they sign. This means that if the borrower does not pay, the creditor can immediately seek repayment directly from the co-signer without having to first pursue the borrower.

A guarantor, on the other hand, may have slightly different obligations depending on the wording of the contract. Some guarantee agreements require the creditor to first make a demand on the primary borrower before holding the guarantor liable.

Examples of co-signer responsibilities include:

• A co-signer on a residential lease being held responsible for unpaid rent or damage to the property.
• A co-signer on a loan covering missed payments, accrued interest, or default penalties.

Under Ontario contract law, a co-signer is treated as a full party to the contract, carrying the same legal obligations to repay as the primary borrower.

When a Co-Signer Defaults

Although co-signers agree to guarantee payment, disputes arise when they themselves refuse or fail to meet the obligation. In these situations, a landlord, lender, or even the primary borrower may need to pursue repayment through the courts.

If a co-signer defaults, the creditor can seek recovery for:

• Unpaid rent or missed loan payments
• Property damage connected to a lease
• Penalties, interest, or additional charges outlined in the contract

When the total amount owed is within the Small Claims Court limit, this forum is usually the fastest and most cost-effective way to pursue repayment.

The Role of Small Claims Court

Small Claims Court in Ontario handles civil disputes involving monetary claims. It is designed to provide an efficient and accessible forum for debt recovery and contract enforcement.

As of October 1, 2025, the monetary jurisdiction of Small Claims Court will increase from $35,000 to $50,000, making it possible to recover larger amounts through this process. This change benefits landlords, creditors, and borrowers dealing with significant debts involving co-signers.

To start a claim, the creditor or landlord must:

1. File a claim with the Small Claims Court that includes details of the debt.
2. Serve the co-signer with the claim, ensuring proper notice under Ontario rules.
3. Provide supporting documentation, such as the signed contract, payment records, and evidence of default.

If successful, the creditor will receive a judgment. This judgment can then be enforced using tools such as wage garnishment, bank account seizure, or a writ of seizure and sale against personal property. Certain assets are protected by Ontario’s Execution Act, and there are procedural rules and timelines that must be followed for enforcement.

Defenses Available to Co-Signers

Co-signers are not without options when facing a claim. Common legal defenses include:

• Misrepresentation: Claiming they were misled about the terms or nature of the agreement.
• Duress or coercion: Arguing they were forced to sign under pressure.
• Improper guarantee wording: Challenging the enforceability of the agreement if the language was unclear or incomplete.

These defences require careful presentation of evidence, and the outcome depends on the facts of the case.

Why Legal Representation Is Essential

While Small Claims Court is designed to be more accessible than higher courts, it remains a formal legal process. Procedural mistakes or incomplete evidence can result in a dismissal of the case or loss at trial.

A knowledgeable paralegal can help:

• Determine whether the claim should proceed in Small Claims Court or another venue.
• Prepare accurate forms and evidence to support the claim or defense.
• Represent the client effectively at hearings, improving the likelihood of a successful outcome.

Tim at MTS Paralegal Services has extensive experience representing both creditors and individuals affected by co-signer defaults. With the new $50,000 Small Claims Court limit coming into effect on October 1, 2025, Tim is prepared to assist with higher-value cases that previously would have required more complex court proceedings.

Taking the Next Step

When a co-signer defaults, acting quickly is critical. The longer a debt remains unpaid, the harder it may be to recover. Whether you are seeking unpaid rent, loan payments, or damages under a co-signed agreement, Small Claims Court provides a practical and enforceable path to recovery under Ontario law.

For tailored advice and representation, contact Tim at MTS Paralegal Services by visiting mtsparalegalservices.com or calling (226) 444-4882.