Debt Collection – the do’s and don’ts
Do you have trouble chasing debtors for payment? – There are a number of things you can do to improve your debt collection process.
First – Debt Collection companies can be expensive, they often charge you, the creditor, their fees on top of the solicitor’s fee who they instruct on your behalf. The benefit of instructing a solicitor directly is that solicitor’s fees are charged on a sliding court scale and must be agreed between the solicitor and the client before work is undertaken thus saving you considerable expenditure to recover your debt.
Secondly – the most prudent thing to do is to request up front payment either in full or at least enough to cover your costs and expenses.
And thirdly – it is important to have effective terms of trade, especially where you are selling goods that are considered “Personal Property” under the Personal Property Securities Act 2009 (Cth).
Never fear – if you have not implemented the above recommendations, you can still initiate court action to recover the amount you are owed plus the majority of your legal costs. The cost of initiating court action is on a sliding scale which is dependent on the amount you are owed. For example, if you are owed $600.00 your initial costs on a complaint will be $861.40, ALL of which is added to the debtor’s debt and includes your court filing fee, solicitors fee and the service fee for the court complaint to be served on the debtor. For a complaint for say $30,000.00, the initial costs would be $1,703.20 and again added to the debtor’s debt.
If the debtor is a company and the debt is more than $2,000.00, you can simply serve a Creditor’s Statutory Demand for Payment. The demand must be This put the debtor company on notice that if they do not repay the debt within 21 days of the Demand, you will apply to the court to wind-up their company. This if often an effective way of recovering your debt.
As litigation can be costly – it is important to try to establish the financial means of the debtor before taking court action; nobody wants to throw good money after bad. Therefore, if the debtor is a company, it is prudent to do a company search. Where the debtor is an individual, it is prudent to know if the debtor is employed and if they own any real estate. Once a court complaint is served on the debtor they will have 21 days to file a defence or to pay the amount owed plus your costs. If the debtor does neither, then you may enter a default Judgment against them for the debt owed plus your costs.
Now it is time to choose how to enforce your Judgment.
Your Judgment – may be enforced in a number of ways. Where the Judgement is against a company, you can issue a Statutory Demand for payment and then apply to wind the company up (although you can do this without a court judgment). Where the Judgment is against an individual debtor, you can Summons the debtor to court to be examined about their finances and if they don’t come to court on the date specified in the Summons, you may request the court to issue a Warrant for their arrest. With your Judgment in place you can Subpoena the debtor’s wage slips from their employer and ask the court to make an order that a percentage of the debtor’s wage is deducted each week to be repaid to you and their employer is compelled to comply with the order. Alternatively, you can apply for a lump sum to be deducted from their bank account if they have the means of payment or you may decide to issue a Warrant to seize personal property from the debtor’s residence.
If a Warrant to seize person property – is not satisfied as there is no property to seize, you may upgrade your Warrant to the Supreme Court and then register that Warrant on the Land Title of the debtor’s real property. The Sheriff then has the power to auction the debtor’s property to satisfy the debt owed to you. This step is really a last resort and in most cases payment will have been secured by the other means previously mentioned.
There will be further court fees, legal costs and incidental costs in enforcing your Judgment, which the debtor may or may not be liable for. It is important to seek legal and procedural advice before commencing any action to recover a debt and you should satisfy yourself that the debtor is capable of making repayments in some form before spending your hard earned on chasing a bad debt.