Debt Recovery FAQ

Usually a letter of demand setting out the amount, basis, a deadline (typically 7-14 days), and consequences of non-payment. A clear demand often prompts payment or dialogue and is evidence of the debt for later proceedings.

Most debts have a 6-year limitation period from when the cause of action accrues (typically the date of default). Some jurisdictions and claim types differ. After limitation, the debt becomes statute-barred and cannot be enforced.

Partial payment or written acknowledgment of the debt can restart the limitation period. This is why debtors are often advised not to make partial payments or written admissions on old debts without advice.

Court choice depends on the amount and location. Local/Magistrates Courts handle smaller claims (up to $100,000 in most states); District/County Courts handle mid-range; Supreme Court handles large claims. Federal Circuit and Federal Courts hear federal matters.

A statement of claim is the document filed to commence court proceedings. It sets out the facts, the cause of action, and the relief sought. It must be served personally (with exceptions) on the defendant.

If no defence is filed within the prescribed time (usually 28 days), the creditor can apply for default judgment — a judgment entered without a hearing. Default judgments can be set aside for good reason but are routine for undefended debts.

A statutory demand under section 459E of the Corporations Act is a formal demand for payment of an undisputed debt of at least $4,000 against a company. If not satisfied within 21 days, the company is presumed insolvent.

The debtor has 21 days to pay, reach agreement, or apply to the court to set aside the demand. Grounds include a genuine dispute, an offsetting claim, or defect in the demand. Missing the deadline is fatal — the court has no power to extend.

A bankruptcy notice is the individual equivalent — a formal notice demanding payment of a judgment debt over $10,000. Non-compliance within 21 days is an act of bankruptcy, enabling the creditor to petition for bankruptcy.

A winding up application asks the court to place an insolvent company into liquidation. It is typically based on unsatisfied statutory demand or proof of actual insolvency. The liquidator realises assets and distributes to creditors.

Enforcement options include writ of execution (seizure and sale of goods), garnishee order (on wages or bank accounts), charging order over real property, examination of the debtor, and, for large debts, bankruptcy or winding up.

A garnishee order requires a third party (typically a bank or employer) to pay money owed to the judgment debtor directly to the creditor. Limits apply to wages to preserve minimum income for the debtor.

Usually yes, if the contract includes a costs clause or the court awards costs to the successful party. Costs are assessed on a party/party basis (typically 60-80% of actual costs) unless the contract provides for indemnity costs.

Contractual interest at the agreed rate, or statutory pre-judgment interest (approximately 4-6% above the RBA cash rate, set by Practice Note). Post-judgment interest accrues until payment, typically at similar rates.

A personal guarantee allows the creditor to pursue an individual guarantor if the primary debtor defaults. Guarantees must be in writing and signed. Recovery is the same process but against the guarantor personally.

A search of the Personal Property Securities Register (PPSR) shows registered security interests over the debtor's assets. This helps determine whether other creditors have priority and whether any recoverable assets are unencumbered.

Debt collectors and agencies generally need a licence under state fair trading legislation and must comply with the ACCC/ASIC Debt Collection Guideline, which prohibits harassment, misleading statements, and contact outside reasonable hours.

Yes, for small debts (up to $10,000 in most states/territories tribunals or $20,000 in some higher tribunals). Procedures are simpler, costs recoverable are limited, and parties often appear without lawyers.

Unsecured creditors must prove their debt in the bankruptcy or liquidation and receive a pro-rata dividend from available funds. Recovery is usually partial or nil. Secured creditors can enforce their security outside the process.

Letter of demand: $150-$500. Court proceedings to default judgment: $1,500-$4,000. Defended proceedings: much more, depending on complexity. Enforcement steps: $500-$2,500+. Many firms offer fixed-fee debt recovery packages for uncontested debts.