Debt Recovery – Are you chasing debt?

It can be extremely frustrating for a business (or individual) when a client does not pay amounts owing within the timeframe requested; it can also be detrimental to the operations of a business. As a business owner (or individual), you may be disheartened and wondering what steps you have available to chase the debts.

Preliminary steps

We recommend you explore all avenues to ensure you have legal standing to advance a claim on a debtor. This might include:

1. Providing your clients with Terms and Conditions prior to undertaking any work or providing any goods. We refer you to our blog of 7 July 2022 as to why these are important when chasing debts (https://www.roachcorporatelaw.com/terms-and-conditions-what-to-consider-as-a-business-owner/).
2. Ensuring that the debtor has received the communications from you to inform them the debt is due; if they have not replied or answered your calls, it may be that their contact details have changed, and they are unaware of the urgency of paying the debt.
3. Ensuring that the debtor is not already in liquidation or administration or bankruptcy which can affect the debtor’s legal ability to pay you. We can assist with finding this information.
4. Send a formal letter to the debtor detailing the exact amount owed and when they need to pay it. This may be more effective than attempting to call or email the debtor.
5. You may wish to engage a debt collector to assist you in chasing the debt.

Legal action

If all the above steps fail and the client still has not paid you (even after hiring a debt collector), it may be time to consider taking legal action. We can assist you with legal action, tailoring to your specific circumstances. The following options can be pursued in a claim for debt in South Australia and are briefly summarised:

1. The Pre-Action Process under the Uniform Civil Rules 2020 (SA). This regime must be undertaken prior to filing a court claim against the debtor. This process is required if the debtor disputes the debt and the amount owed is over $12,000.00. We can discuss the process more with you at the time of engagement as the pre-action regime can be very involved and the rules of Court must be followed closely.
2. A Final Notice. Serving a final notice on the debtor allows you to demand payment of the debt within 21 days and notifies the debtor that if they do not pay within this timeframe, you will be filing a court claim against them. This bypasses the lengthy and potentially costly Pre-Action Process above. Under the South Australian Uniform Civil Rules, to be able to file a Final Notice you must have a ‘reasonable belief that the claim is not genuinely contestable’, or the amount must be under $12,000.00. Our team can talk you through the process and provide advice and guidance on the best path for you to take against your debtor, including obtaining a judgment and avenues of enforcement action to recover the monies.
3. Court Action. Assuming points 1 and 2 above fail, you can take the step of filing and serving a claim in the correct jurisdiction in South Australia with a view to obtaining either a default judgment or a final judgment and then taking the necessary steps to enforce the judgment debt as against the debtor. Some methods of enforcement could be by way of bankruptcy, warrants of sale over personal and/or real property, orders for “drip feed” payments.
4. Creditors Statutory Demand for Payment pursuant to section 459E of the Corporations Act 2001 (Cth). This is a method of recovering debt (above $4,000.00) from a company pursuant to the Corporations Act, and formally demands payment of the debt within 21 days of service of the demand. If the debtor does not pay within that timeframe, then the company is deemed insolvent, and you can take further action to wind up the company. The threat of being deemed insolvent can be incentive for the company to pay the debt within the 21 days.

Any of the above options can be facilitated by our legal team; and which option you choose will depend on your circumstances. The steps above are a snapshot but our team can assist and provide more detailed advice based on your circumstances, whether that includes us running the matter or assisting in the background. If you have outstanding debtors and wish to discuss your options for recovering debts, please do not hesitate to contact our team on (08) 8186 1735.

The following information is general information only and is not and does not constitute legal advice. If you rely on the information herein, you do so at your own risk. For tailored legal advice for your specific situation and circumstances, please contact us directly.