Business & Company: Debt Collection - Guides
Debt Collection
5. Going to Court
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Last updated: 17 Jul 2015
- If a letter of demand is not successful in securing the payment or a satisfactory arrangement for payment you will usually need to commence legal proceedings.
- If the matter is not resolved (settled) when you commence legal proceedings then it will need to be argued in court and a judgment obtained against the debtor.
- It is usual the case that legal proceedings for debt recovery must be started within six years of the date of the debt.
- To start legal proceedings to recover a debt the creditor (plaintiff) or their lawyer must complete and file a ‘statement of claim’ in the Local Court where they want the matter dealt with. This step is called issuing a statement of claim.
- A statement of claim states what money the plaintiff claims is owed to them, who owes it and it explains the circumstances of how this debt arose. Once filed with the court registry it becomes an official court document.
- You must use the official statement of claim form that is available from any Local Court or Magistrate’s Court. Most courts have registrars who may help fill you out the form.
- Statements of claim for debt collection are generally fairly simple documents with minimal pleadings. Pleadings are paragraphs setting out the facts of the debt such as:
- the amount owed;
- how the debtor came to owe the money; and
- any attempts that have been made to obtain payment.
- The most important issue with claims in lower courts such as the Local or Magistrate’s Court is to identify exactly who or what company owes the debt and to get their exact personal or company name and contact address correct on the court document.
- After the claim is issued it must be properly served on the debtor. This means the creditor must serve (give) the debtor an official copy of the statement of claim. An official copy is one that has been filed and stamped by the court. Once this happens then it is accepted that the defendant has been notified about the court proceedings against them.
- There are different ways you can serve a statement of claim. It may be either:
- served personally which is when you hand the defendant a copy in person;
- If it is in an envelope it should be clearly addressed to them.
- left at the business or home address of the defendant; or
- In this case it may be left with a person who is over 16 years of age. This person must appear to be employed at the business address or live at the residential address.
- served in an envelope by post.
- If you decide to serve the statement of claim personally there are also different options. The most common way is to have your lawyer or a process server do it on your behalf. As a creditor you are allowed to serve the documents yourself if you choose to take this option.
- If you have any doubt about whether the debtor is at the address you have for them it is best to have service affected by a process server. This may save you the problem and expense associated with the debtor alleging they did not receive the claim.
- The amount of the debt being claimed determines the court in which proceedings are commenced. The courts in each state and territory have set specific monetary amounts in this regard. As of October 2014 they are as follows:
- in New South Wales the
- Local Court can hear debt claims up to $100,000;
- the District Court can hear claims over $100,000 and up to $750,000; and
- the Supreme Court can hear claims over $750,000.
- in Victoria the
- Magistrate’s Court can hear debt claims up to $100,000; and
- The County Court can hear claims over $100,000.
- in Queensland the
- Magistrate’s Court can hear debt claims up to $150,000;
- the District Court can hear claims over $150,000 and up to $750,000; and
- the Supreme Court can hear claims over $150,000.
- in Western Australia the
- Magistrate’s Court can hear debt claims up to $75,000;
- the District Court can hear debt claims over $75,000 and up to $750,000; and
- the Supreme Court can hear claims over $750,000.
- in South Australia
- the Magistrate’s Court can hear debt claims up to $100,000; and
- the District Court can hear claims over $100,000.
- in Tasmania
- the Magistrate’s Court can hear debt claims up to $50,000 and above if all parties agree;
- otherwise the claim is dealt with in the Supreme Court.
- in the Australia Capital Territory
- the Civil and Administrative Tribunal can hear debt claims up to $10,000 and above if all parties agree;
- the Magistrate’s Court can hear debt claims over $10,000 and up to $250,000; and
- the Supreme Court can hear claims above $250,000.
- in the Northern Territory
- the Local Court can hear claims up to $100,000; and
- the Supreme Court can hear claims over $100,000.
- The debtor usually has 28 days after service to respond to the claim. This can be done by them filing either a ‘notice of appearance’ or a ‘defence’ document at the court registry.
- If you are a debtor who has received a statement of claim and you agree with the debt then it is not too late to pay your debt. You can tell court that you admit to owing the money and apply to pay the debt by instalments. If your creditor does not agree to your proposed payment plan then the claim will most likely continue through the court process.
- If you are a debtor who has received a statement of claim and you disagree with the debt then you can defend the claim. Your lawyer can lodge a formal defence with the court. This document will set out your reasons for disagreeing with the debt. In some cases you may wish to make a counter-claim against the creditor such as if you received defective goods or if the creditor did not complete some work that was agreed. In this case the court will list your case for a hearing.
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