What are the Steps in the Debt Recovery Process?

If you are owed money and want to know how to recover money from your debtors, we have created a guide to understanding the debt recovery process in Australia so that you know exactly what to expect at every stage.

1. Issue a Letter of Demand

The first step is to send a letter to the debtor demanding payment of the debt in full within a period of time, normally 7 to 14 days. In our experience, a well drafted and firm letter of demand will result in the repayment of the debt in most circumstances or will prompt settlement discussions and negotiations. In the letter the legal actions that might be taken against a debtor in case of non-payment is also specified.

2. Negotiate to Settle the Debt

After receipt of the letter of demand, the debtor will may try to negotiate the debt, either by requesting to pay a one-off reduced figure, which may or may not include interest or by requesting to pay the debt by instalments. If these negotiations are not able to settle the matter or the debtor fails to respond to your letter of demand, you would then normally need to commence legal proceedings.

3. Commence Legal Proceedings

If the letter of demand has resulted in no action because the debtor has refused or neglected to pay the debt, the creditor can commence legal action in the appropriate Court depending on the size and nature of your debt and the orders you are seeking.

The proceedings will commence by filing a Statement of Claim, which would then be filed in the appropriate Court and then served on the debtor. Within 28 days of the receipt of the Statement of Claim, the debtor has to respond to the Court.

If no defence or cross-claim is filed during that time, the debtor will be in default of the proceedings and the Court may enter judgment against the debtor without further notice.

Upon the judgment being made, the last step would be to enforce the judgment to ensure the debtor pays the debt.

If the debtor violates the Court Order and fails to pay the outstanding amount, it is the creditor’s responsibility to enforce the judgment. The creditor can enforce the judgement of the Court anytime within 12 years from the date of the judgment.

If you would like find out more about your rights and options, Straits Lawyers are here to help. We are now offering online services in both English and Chinese.

Please note that this article does not constitute legal advice and Straits Lawyers will not be legally responsible for any actions you take based on this article.