Business & Company: Debt Collection - Guides
Debt Collection
3. Demanding Payment
Firm / Chambers:
Last updated: 17 Jul 2015
- In all states and territories certain procedures must be carried out before a debt matter can be taken to court. The first is to make sure the debtor is aware of the alleged debt by sending them a letter demanding payment. This is called a ‘letter of demand’.
- The laws and court rules governing debt collection set out how a letter of demand must be written and how much time must go by after it is sent to the debtor before you can commence court action.
- A letter of demand must make it clear to the debtor what the proposed claim is about. For example the letter should give comprehensive details including:
- the date of the transaction;
- a description of the supplied goods or services;
- any deposits or partial payments made; and
- the amount which has not been paid.
- The letter of demand must also clearly state the creditor’s intention to issue legal proceedings if the payment does not occur.
- Letters of demand will usually satisfy Australian court rules and debt laws if they are sent at least one month before any legal proceedings are issued. The length of time required may be different in your state or territory so seek advice from a lawyer if in doubt.
- In all states and territories it is illegal to draft and send someone a letter of demand that appears to be a court document. If you receive this kind of letter then you can make a complaint to:
- the police;
- to the Australian Competition and Consumer Commission (ACC); or
- the relevant government department concerned with trade in your state or territory.
- There are three main ways a debtor can respond to a creditor’s letter of demand. Either by:
- paying the amount claimed;
- reaching an agreement about payment; or
- satisfying the creditor that they do not actually owe them money.
- The debtor’s options on receiving a letter of demand are either payment in full or a refusal to pay. If you do not dispute the debt and if your circumstances allow it then it is a very good idea to pay the debt in full.
- A debtor can only refuse to pay a debt if you:
- have already paid the debt; or
- do not owe them the money.
- If you owe the money but you cannot afford to pay immediately then should try to negotiate with the creditor about going on a payment plan. A lawyer can help you conduct these negotiations. You can look for one near you in our free Find a Lawyer directory.
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