When a debtor fails to pay, knowing the correct legal steps can mean the difference between recovering your money and writing it off. As debt recovery lawyers in Frankston, we guide creditors through the process from initial demand through to court enforcement.
Step 1: Letter of Demand
The first formal step is a letter of demand. This letter identifies the debt, states the amount owed (including any contractual interest), references the agreement or invoice, and sets a reasonable deadline for payment — typically 14 to 21 days. A well-drafted letter of demand demonstrates that you are serious about recovering the debt and provides the debtor with a final opportunity to pay before legal proceedings commence.
Step 2: Choosing the Right Court
If the debtor does not respond to the letter of demand, the next step is to file a claim in court. In Victoria, the court depends on the amount in dispute:
- Magistrates’ Court of Victoria — claims up to $100,000
- County Court of Victoria — claims between $100,000 and $750,000
- Supreme Court of Victoria — claims over $750,000
For debts owed by companies, you may also consider issuing a statutory demand under section 459E of the Corporations Act 2001 (Cth). If the company fails to pay or apply to set aside the demand within 21 days, it is presumed to be insolvent — opening the door to winding-up proceedings.
Step 3: Default Judgment or Hearing
After the claim is filed and served, the debtor has a limited time to file a defence. If no defence is filed, you can apply for default judgment — a court order confirming the debt without the need for a hearing. If the debtor disputes the claim, the court will schedule a hearing where both parties present their case.
Step 4: Enforcing the Judgment
A judgment in your favour does not automatically mean you will receive the money. You may need to take enforcement action, including:
- Garnishee orders — requiring the debtor’s employer or bank to redirect funds to you
- Warrants for seizure and sale — authorising the Sheriff to seize and sell the debtor’s assets
- Examination summons — compelling the debtor to attend court and disclose their financial position under oath
- Instalment orders — requiring the debtor to pay the judgment in regular instalments
Time Limits
Debt recovery claims in Victoria are subject to limitation periods under the Limitation of Actions Act 1958 (Vic). For most contractual debts, the limitation period is 6 years from the date the debt became due. If you do not commence proceedings within this period, your claim may be statute-barred.
Need Help Recovering a Debt?
Professional Edge Lawyers acts for creditors and businesses in debt recovery matters across Frankston, Melbourne, the Mornington Peninsula, and greater Victoria. Contact us on 1800 776 529 for a confidential discussion about your matter.
