A Step by Step Guide to Debt Recovery

What is the Debt Recovery Process in Australia?

Entering the legal arena can be a daunting process and not something to be undertaken lightly. However, if all of your previous attempts to recover debt have been unsuccessful, a professional and experienced debt collection agency can often secure an outcome in your favour.

We have a thorough understanding of the ACCC national best practice guidelines for collectors and creditors, access to expert legal advice and guide our clients through the process of debt recovery through the Australian courts.

However, before commencing any legal proceedings it is helpful to understand the process, and here we outline what you can expect.

 

1. Contact the debtor

Rather than resort straight to legal action, the debt collection agency will also take steps to resolve the issue without involving the courts. This process involves:

 

a) Sending a debt collection letter

Debt collection letters are a final notice to the debtor notifying that the account is overdue. It will state that despite previous reminders, the matter has now been referred to a collection agency which may result in legal proceedings.

Any legal proceedings will rely heavily on the terms of trade both yourself and your customer have agreed to prior to conducting business.

 

b) Attempting to contact the debtor via phone

If the debt collection letter does not resolve the issue, your agency will follow up with a phone call. The ACCC guidelines clearly state that frequency of contact should only occur when necessary, and for a specific reasonable purpose such as:

• Provide information to the debtor about their account
• make a demand for payment
• offer to work with the debtor to reach a flexible repayment arrangement
• accurately explain the consequences of non-payment, including any legal remedies available to the collector/creditor, and any service restrictions that may apply in the case of utilities (for example, disconnection of electricity or gas supply or restriction of water supply)
• make arrangements for repayment of a debt
• put a settlement proposal or alternative payment arrangement to the debtor
• review existing arrangements after an agreed period
• ascertain why earlier attempts to contact the debtor have not been responded to within a reasonable period, if this is the case
• ascertain why an agreed repayment arrangement has not been complied with, if this is the case
• investigate whether the debtor has changed their residential location without informing you, when there are grounds for believing this has occurred
• sight, inspect or recover a security interest
• or for other similar purposes

Most agencies will attempt to make contact during standard business hours, however phone contact can be made between the hours of 7.30am and 9.00pm.

 

2. Issue of complaint

Issuing a compliant officially commences legal proceedings and can only be done when all other attempts to resolve the issue have been unsuccessful. The Issue of Complaint contains the facts and legal reasons to support your claim against the debtor. It also includes any suggested remedies and requested damages to be paid.

The amount of debt to be recovered and damages to be claimed will dictate which division of your local court hears your case, and this can vary from state to state. In NSW, the Small Claims Division deal with amounts up to $10,000. Debts or damages that exceed that amount are referred to the General Claims Division. In Victoria, the Magistrates court will deal with claims up to $100,000.

 

3. Service of complaint

Once the complaint has been issued, a valid copy of it needs to be provided to the debtor. This process is referred to as the Service of Complaint.

When the complaint is filed with the Australian courts, both parties receive a case number and two blank Notices of Defence. A Notice of Defence enables the debtor to defend against the claim. The debtor will need to provide reasons for their defence and outline their version of events. They may elect to accept your version of events, or agree to specific areas you have already outlined in your complaint.

 

4. Judgement or Payment Arrangements

Once a judgement is received in your favour, the defendant will be requested to pay the amount owing. Depending on the debtors cashflow, outcomes could be in the form of:

• Warrant to seize assets (6 – 8 weeks)
• Warrant of seizure & sale to sell real estate (10 – 12 weeks)
• Bankruptcy notice (2 weeks)
• Petition (8 -10 weeks)
• Oral examination to understand debtor’s financial position (8 weeks)
• Order against debtor’s earnings (6 weeks)
• Instalment order (4 weeks)
• Oral examination (4 weeks)
• Statutory demand (21 days)
• Winding up petition (8-10 weeks)

 

If you decide to pursue outstanding debts through the Australian courts, it is highly recommended you speak to a legal professional. By engaging the services of a professional debt collector, they may be able to avoid legal action and successfully secure payment from your debtor. If court proceedings are your only course of action, they can represent you and provide legal advice to increase the likelihood of a favourable outcome.

For more information on the debt collection process in Australia, please get in touch.