The best debt collection technique is the most cost effective. We help our clients get paid (often with interest, costs and without destroying the relationship) every day of the week. Read our Client Reviews and then call us to talk to an experienced Adelaide lawyer about your debt collection matter on a no obligation basis.
Recommendation for Appropriate Action
All of our debt collection solutions focus on getting the quickest result in the most cost effective manner. In our experience commission based debt collection is often the least effective and most costly way to engage a professional debt collector.
There are many different types of debt collection actions. We charge on a time basis but cost is minimised by using the appropriate action for your circumstances. We take into account your relationship with the debtor (and whether you care about the future of that relationship), the amount involved, the circumstances of the debt, documentation including correspondence, security arrangements, your financial circumstances and a host of other matters.
We can review your debt collection practices and, where necessary, provide you with appropriate terms of trade and collection procedures which will significantly reduce the need for legal intervention and improve your bank balance.
Sometimes rapid legal action is the most effective debt collection mechanism to ensure payment. Read on if you’d like to find out if you require the services of a litigation lawyer.
Legal Action Debt Collection Process
Generally speaking, legal action to collect a debt involves 2 steps:
Step 1: Getting Judgement
Step 2: The Enforcement Process
- Investigation & Examination Summons
- Warrants of Sale and Possession
- Charging Orders
- Garnishee Orders
Certain debts may involve different debt collection mechanisms:
Commercial Tenancy Arrears – Distraint of Goods and Re-entry of Premises
Where a commercial tenant owes a landlord rent, it may be open to the landlord to seize (distrain) the tenants goods for the rent and if payment is not made to sell those goods. The landlord may also be entitled to re-enter the premises, terminate the lease and sue the tenant for the landlord’s loss and damage.
Company Debtors – Statutory Demand
Where a company owes money and it is unlikely that the debt is disputed. In that situation the creditor can issue a statutory demand pursuant to the provisions of the Corporations Act. A statutory demand gives the debtor company 21 days to either pay the debt in full or apply to a relevant Court to have the statutory demand set aside. If the debtor company does neither then it becomes very difficult to challenge the statutory demand which can then be used as the basis for a winding up or liquidation action against the company. The Statutory Demand can be an extremely powerful and cost effective debt collection mechanism.
The starting point for most businesses is to have good terms of trade and a process which ensures they are used for each transaction. Find out more
For most debts the following procedure is applicable:
Step 1: Getting Judgement
The process in getting an enforceable Court judgement is set out below:
Time to Sue
A contract debt becomes actionable (you can sue for it) the first day that it becomes overdue. If payment is not made, the time limit to file a court summons is generally six years from the first day the debt is overdue. If the debtor has signed a legal agreement to pay the debt or acknowledgement of it, this may extend the time. Otherwise, the Court has power to grant an extension but it generally needs a very good reason.
Amount of the debt
If the debt you are owed is $12,000.00 or less, it is a small claim and will be dealt with by the Magistrates Court as a minor civil action. If the sum involved is over that range, the Court may still deal with it as a minor civil action if the parties agree. Those matters are conducted as an investigation of the issues by the Court; generally, no lawyers are allowed. Debts over $12,000.00 but not over $100,000.00 are dealt with by the Magistrates Court; unless the parties agree to the Magistrates Court hearing the matter, debts over that amount must be dealt with by a higher court, such as the District Court, Federal Court or Supreme Court.
Final Notice of Claim
A final (21 day) notice of claim is required by Court rules and highly recommended as it may avoid the cost of proceeding to Court.
Issue and Service of Summons
A summons is prepared by the plaintiff or its solicitors but issued and “sealed” by the relevant Court. A plaintiff has from 6 months up to one year to serve the summons but we recommend that it should be served as soon as possible after issue.
A summons may be served in a number of different ways and in certain situations the court may even authorise service by notice in the newspaper or some other method.
Signing Judgment
Once the summons has been served, the defendant has set times from the date of service to file a defence. If the defendant does so, then the matter will probably proceed to court for a hearing. In many debt collection cases, the defendant will not file a defence. Therefore, a default judgment may be obtained. At the very least the judgment will have a negative impact upon the debtor’s credit rating and his or her ability to obtain finance down the track.
A debtor may apply to have the Court set aside the judgment, so that the claim goes to trial. The Court will only do this if the debtor can set out in an affidavit a good defence on a factual or legal ground, and show that there was a good reason why the defence was not filed in time. Even then, a Court may decide that it is not fair to set aside the judgment, especially if the debtor has been slow to apply for it. Or the Court may require the defendant to pay the whole amount of the claim or some lesser sum into Court, which often defeats the debtor’s purpose.
Step 2: The Enforcement Process
If judgment has been obtained and the debt is over $2,000.00, bankruptcy proceedings can be commenced against a personal debtor.
Under the Enforcement of Judgments Act 1991, there are a range of options which you can select from in applying to the Court to enforce your judgement.
Investigation & Examination Summons
Issuing an investigation summons is often the first step in having the Court enquire as to a debtor’s means to pay a judgment debt. The debtor must attend, otherwise the Court will issue a warrant for his or her arrest. At the investigation summons hearing, the Court asks the debtor for evidence of his/her means of paying the debt. You can attend and ask questions as well. You can then ask the Court to make payment by a certain date, or instalments. If the debtor does not pay on time, or misses more than two instalments, you can ask the Court to proceed with an examination summons hearing. At this hearing, the Court can commit the debtor to up to 40 days in prison if the debt is not paid. The serving of prison time by the debtor does not reduce or abate the debt.
Warrants of Sale and Possession
If you know of real or personal property owned by the debtor, you can issue a warrant of sale or possession. If the Court makes these orders, the Court Sheriff can conduct an auction of the land/goods and make payment to you of your debt, or he can confiscate the property and give it to you in satisfaction of the debt.
Charging-Orders
A charging order is like a caveat. The Court can ‘freeze’ any sale or proposed dealing in a debtor’s land until the debt is paid. This protects you from the debtor disappearing along with his/her assets.
Garnishee Orders
If a person owes money to the debtor, you can seek a Court order that the person pay the money to you instead of the debtor. This is known as a Garnishee Order. The salary or wages of a debtor can only be garnished by consent, but other situations can be subject to an order provided that the third party has been given an opportunity to be heard. Therefore, bank accounts, trust money or dividends, bequests from deceased estates, rent due and other debts can be the subject of an order. Details of such monies due can be ascertained at an Investigation Summons hearing, for example.
Read our Client Reviews and then talk to us about your debt collection matter on a no obligation basis.
