Debt recovery in AustraliaA 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 backthe money which is owed by the debtor.
What is and what is not a debtStrictly speaking, a debt arises in situations where the legal liability on the debtor topay or repay money is clear, and the debtor has failed to meet his, her, or its obligationto 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 andit is not repaid when an account is rendered for goodsand 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 procedurefor the person who is seeking to be paid.
For example, a contract may specify that asum is payable upon completion of a project.
However, the person who was to have paid querieswhether the project has been completed to the required level of skill and care.
In thissituation the legal issue may be whether there is a breach of contract or negligence, anddebt recovery proceedings may not be suitable.
We recommend you speak to a lawyer prior tocommencing debt recovery proceedings on your own so that you can get the right advice regardingwhether this is the appropriate course of action for your situation.
Letters of demand In every jurisdiction, creditors are expectedto 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 specifythat it is a letter of demand detail the amount of the debt and underwhat circumstances the debt became due and payablegive a deadline for payment of the debt, andadvise the debtor that, unless payment is made by the due date, the creditor willcommence proceedings in the appropriate Court or Tribunal.
Where debt recovery proceedings are initiated Once a letter of demand has been sent, ifa debtor either ignores the letter or refuses to pay, then the creditor may commence proceedingsto recover the debt.
The appropriate Court or Tribunal for thecommencement 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 debtdisputes for amounts under $25,000, provided that the matter is related to certain kindsof disputes such as money lent and not repaid, unpaid invoices, and IOUs.
It also has jurisdictionto 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 jurisdictionto hear disputes in relation to goods or services where payment for the goods or services hasnot been made.
It does not have jurisdiction to hear general debt recovery matters likeQCAT.
Each of the Courts in the individual statesand territories has a different jurisdictional limit, which you should check prior to initiatingproceedings.
The Supreme Court of Western Australia, for example, hears civil matterswhere the amount in dispute is over $750,000, whereas in South Australia either the DistrictCourt or the Supreme Court may hear civil disputes of $100,000 or above.
The procedure for debt recovery The procedure for debt recovery depends onthe 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 youfollow the correct procedure.
Alternatives to litigationIt is always recommended that a creditor endeavour to resolve a debt recovery issue with a debtorthrough negotiation unless it is inappropriate in the circumstances, such as where therehas been a threat of violence or a debtor cannot be located.
Some states and territories have government departments which offer dispute resolutionservices, such as the Victorian Small Business Commissioner or the Department of Justiceand Attorney General’s dispute resolution branch in Queensland.
What to do next If you or someone you know is owed a debtyou 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 directlyto a lawyer from 7am to midnight, 7 days a week.
Your call will be treated with the strictestconfidentiality and without judgement.
The lawyer will assess your matter and recommenda course of action.
Should you need a Court lawyer, even at veryshort notice, the Legal Hotline staff will be able to arrange one for you.
You can alsorequest a call back via the website gotocourt.
Au and a lawyer will call you back to assessyour matter.