What are the steps in the debt recovery process?
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. We will telephone the debtor if we have not received a response to the letter of demand, with a view of seeking to enter into an arrangement to pay the debt, an admission (from the debtor as to the balance of the debt) or ascertain their intentions regarding the debt.
2. Attempt to negotiate a settlement of the debt
After receipt of the letter of demand, the debtor will normally try and 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. Commencing legal proceedings
If the letter of demand has resulted in no action because the debtor has refused or neglected to pay the debt, Rockliffs can commence legal proceedings in the Local, District or Supreme Court, depending on the size and nature of your debt and the orders you are seeking.
The proceedings will commence by filing an ‘originating process’. This is normally a statement of claim, but can also be commenced by way of summons. The statement of claim would then be filed in the appropriate Court and then served on the debtor.
How long does the debtor have to respond to the statement of claim?
The debtor has 28 days from the date of service to file a defence in the proceedings, and may also elect to file a cross-claim at that time.
When filing a defence, a debtor might dispute that the whole debt exists or is owing to you, or might argue that a different sum is owed.
What if no defence is filed during the 28 day period?
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.
This is done by making an application for default judgment, and if successful and the orders made, the Court order or judgment will be listed against the debtor’s credit file which can have serious consequences upon their ability to obtain credit or finance.
Upon the judgment being made, the last step would be to enforce the judgment to ensure the debtor pays the debt.
What if the judgment has still gone unsatisfied?
If after successfully receiving a judgment the debtor still refuses or has neglected to pay the debt, there are various options available so you can enforce the judgment to receive payment from the debtor. For more information on methods of enforcing a judgment, click here.
If after receipt of judgment you have tried to enforce the judgment without success, you might then want to consider serving a bankruptcy notice (for debts over $5,000 by an individual) or a creditor’s statutory demand (for debts over $2,000 by a company).
Where a judgment has been entered and there is no genuine dispute in relation to the debt, a creditor’s statutory demand or bankruptcy notice can be issued without needing to commence legal proceedings, and often produces quick and effective results for our clients.
However, prior to serving any statutory notices, it is important that you promptly receive legal advice as there are strict requirements that need to be complied with prior to service a bankruptcy notice or statutory demand.
If you are having trouble recovering a debt and would like to speak to our highly experienced debt recovery lawyers in Sydney, get in touch with Rockliffs today.