08 June 2017

Debt Collection

Does someone owe you money? If so, you may be wondering how you can recover that debt.

As a general rule, the time limit for commencing proceedings to recover debt is six years from the last payment, however this may vary depending on the nature of the debt owed. In any case, prompt action is optimal, especially where the person who owes you money may become a bankrupt, or the company becomes insolvent. The first step in debt recovery is contacting the person who is indebted to you to try and reach an agreement for payment. If this does not resolve the matter, then you may need to take a more formal step toward recovery.

Letter demanding payment

If negotiations fail you can write a ‘letter of demand’. A letter of demand should include proof of the debt claimed, including how the debt came into existence. It should reference the date the debt was incurred and any agreements that were in writing. The letter should also mention any invoice or quote that relates to the debt. The letter should stipulate the method available for payment, and the time within which payment is to be received. You may also wish to state that if payment is not received within this time, that legal proceedings will be commenced.

It is important that the letter of demand is sent via registered post, requiring a signed postal receipt.

When clients seek our assistance in relation to the recovery of debt, we provide initial advice on the prospects of being able to recover the debt, as well as the legal basis for claiming the debt. We will then prepare and serve a letter of demand. Many cases are resolved within this initial process and it is a relatively cost-efficient means of recovering outstanding debts.

Issuing a letter of demand may also result in the reaching of agreement in relation to a payment plan. This is a positive outcome where the debtor has limited finances, but is willing to repay the debt. Where a repayment agreement is reached, it is important to have the agreement documented in writing. We can assist you to formalise repayment agreements so that they are enforceable if not complied with.

Commencing legal proceedings

If your claim is still unresolved after the abovementioned steps have been taken, it may be necessary, as a last resort, to commence legal proceedings. If you find yourself in this situation, we are able to provide advice on the prospects of recovery and the likely costs associated with litigation. We can then commence and manage those proceedings.


It is said that prevention is better than a cure. There are some steps you can take to prevent bad debtors. For instance, you may conduct background checks on the business or persons who you seek to do business with. You may place limits on the amount of credit that you advance. Invoice more frequently. Keep in contact with customers and seek further information if a payment is late or missed.

It is always prudent to document any agreements that you make in writing.

Our commercial team can provide individual advice as to methods available to better protect your business, including reviewing contracts and terms and conditions of trade.

For more information, contact our commercial team on 07 4036 9700.

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