Debt recovery in Australia
A debt is a sum of money owed by a debtor to a creditor which is legally enforceable.
Debt recovery is the legal process and procedure which a creditor can initiate to get back
the money which is owed by the debtor. What is and what is not a debt
Strictly speaking, a debt arises in situations where the legal liability on the debtor to
pay or repay money is clear, and the debtor has failed to meet his, her, or its obligation
to pay the creditor. Common situations where a debt may arise include:
where one person loans money to another on the condition that it is paid back and
it is not repaid when an account is rendered for goods
and services and it is not paid by the due date where money is due and owing under a tenancy agreement.
If the liability to pay is questionable, then debt recovery may not be the appropriate procedure
for the person who is seeking to be paid. For example, a contract may specify that a
sum is payable upon completion of a project. However, the person who was to have paid queries
whether the project has been completed to the required level of skill and care. In this
situation the legal issue may be whether there is a breach of contract or negligence, and
debt recovery proceedings may not be suitable. We recommend you speak to a lawyer prior to
commencing debt recovery proceedings on your own so that you can get the right advice regarding
whether this is the appropriate course of action for your situation.
Letters of demand In every jurisdiction, creditors are expected
to have issued a letter of demand to a debtor prior to commencing proceedings in Court.
A letter of demand must always: be addressed to the debtor and specify
that it is a letter of demand detail the amount of the debt and under
what circumstances the debt became due and payable
give a deadline for payment of the debt, and
advise the debtor that, unless payment is made by the due date, the creditor will
commence proceedings in the appropriate Court or Tribunal.
Where debt recovery proceedings are initiated Once a letter of demand has been sent, if
a debtor either ignores the letter or refuses to pay, then the creditor may commence proceedings
to recover the debt. The appropriate Court or Tribunal for the
commencement of proceedings will depend on: where the debt arose (which state or territory)
the amount of the debt, and whether the debt is of a particular nature,
such as a consumer-trader claim or a residential tenancies claim.
For example, the Queensland Civil and Administrative Tribunal (QCAT) has jurisdiction to hear debt
disputes for amounts under $25,000, provided that the matter is related to certain kinds
of disputes such as money lent and not repaid, unpaid invoices, and IOUs. It also has jurisdiction
to send to a hearing those disputes which relate to a sum of money less than $3,000.
The Victorian Civil and Administrative Tribunal (VCAT), on the other hand, has jurisdiction
to hear disputes in relation to goods or services where payment for the goods or services has
not been made. It does not have jurisdiction to hear general debt recovery matters like
QCAT. Each of the Courts in the individual states
and territories has a different jurisdictional limit, which you should check prior to initiating
proceedings. The Supreme Court of Western Australia, for example, hears civil matters
where the amount in dispute is over $750,000, whereas in South Australia either the District
Court or the Supreme Court may hear civil disputes of $100,000 or above.
The procedure for debt recovery The procedure for debt recovery depends on
the Court or Tribunal in which the creditor commences proceedings to recover the debt.
We recommend you seek advice from a lawyer prior to commencing your claim to ensure you
follow the correct procedure. Alternatives to litigation
It is always recommended that a creditor endeavour to resolve a debt recovery issue with a debtor
through negotiation unless it is inappropriate in the circumstances, such as where there
has been a threat of violence or a debtor cannot be located.
Some states and territories have government departments which offer dispute resolution
services, such as the Victorian Small Business Commissioner or the Department of Justice
and Attorney General’s dispute resolution branch in Queensland.
What to do next If you or someone you know is owed a debt
you wish to recover, it is important to obtain legal advice as soon as possible.
Go To Court Lawyers operate a Legal Hotline on 1300 636 846 where you can talk directly
to a lawyer from 7am to midnight, 7 days a week. Your call will be treated with the strictest
confidentiality and without judgement. The lawyer will assess your matter and recommend
a course of action. Should you need a Court lawyer, even at very
short notice, the Legal Hotline staff will be able to arrange one for you. You can also
request a call back via the website gotocourt.com.au and a lawyer will call you back to assess
your matter.