Debt collection lawyers are legal professionals who focus on legally recovering debts and enforcement of money orders.
Most businesses encounter bad debts or bad paying clients at some stage.
Recovery of these debts can be frustrating if you do not understand how the civil litigation system works in Queensland and you do not use debt collection solicitors.
Debt collection lawyers can provide advice and assistance to creditors who are serious about recovering debts from a debtor.
In a downturn in the economy, such as post-COVID-19, there is a rise in delinquent debts and bad or late payments. This has a knock-on effect.
In this article, our debt recovery lawyers provide you with tips from a debt collection lawyer to help recover your debts.
What do Debt Collection Lawyers do?
Debt collection lawyers provide advice and assistance to clients who need to recover debts.
Debt collection solicitors can help with:
- Negotiation with debtors;
- Sending letters of demand;
- Alternative dispute resolution;
- Commencing legal action;
- Enforcing judgments;
- Issuing statutory demands;
- Winding up applications;
- Bankruptcy / creditor’s petitions; and
- Drafting credit contracts.
Debt collection lawyers are usually commercial litigation lawyers, so we can advise and assist on all commercial litigation matters.
However, in relation to the legal collection of debts, this article will explain the above in more detail below.
Negotiation with Debtors
In the first instance, debt recovery lawyers will usually try to resolve the dispute by negotiation.
Negotiating the payment of a debt is usually the best option as it avoids the cost and stress of going to Court to recover the debt.
Debt Collection Tip 1 – Leverage
To have a good negotiating position means to have some leverage. This is why debt collection lawyers’ letters are always full of potential things which might happen if the debtor does not pay.
In any good negotiation, you must have some leverage.
Leverage could include waiving interest if they pay now or reducing the debt for an immediate payment.
Alternatively, leverage could mean telling the debtor what can happen if they do not pay the debt, such as winding up, bankruptcy, or a warrant for seizure and sale of the debtor’s real property. Although care must be taken not to foreshadow a cause of action that is not actually available.
Sending Letters of Demand
Part of the negotiation process is to send the debtor a letter of demand.
A letter of demand is a letter setting out the debt dispute, the debtor’s obligation to pay, and the ramifications if the debtor does not pay the debt.
We would always advise engaging a debt collection solicitor to send a letter of demand.
Send a letter of demand – Letter of Demand
Debt Recovery Lawyers Tip 2 – Send a Without Prejudice Letter of Offer
A without prejudice letter, or sometimes called a Calderbank letter, is a letter of offer usually compromising the debt in exchange for immediate payment.
A Calderbank letter will be marked “without prejudice save as to costs” and is an opportunity for a creditor and a debtor to negotiate in good faith without admission of liability.
A Calderbank letter is a good way to reach a resolution to a debt dispute early. However, there are a number of requirements which must be adhered to, so you should engage a collections lawyer to draft and send the without prejudice Calderbank letter of offer.
Send a Calderbank letter of offer – Send a Calderbank Letter
Negotiation is just one (1) form of alternative dispute resolution (“ADR”) but there are a number of other forms of ADR.
Alternative Dispute Resolution
Alternative dispute resolution is a way of resolving a debt dispute without having to go to Court.
There are a number of different types of ADR including:
- BIFA adjudication (for building payment disputes);
- Judicial review of the adjudication decision in the Court.
- Conciliation with the debtor;
- Determination of the debt by an expert;
- Expert arbitration with the debtor; and/or
- Mediation with the debtor.
A lot of these forms of ADR may only apply to certain types of legal matters. You should seek legal advice as soon as possible from suitably qualified and experienced debt collection solicitors to get advice about ADR.
Debt Recovery Tip 3 – Stay Out of Court if you Can
In almost all cases a creditor must do everything that they can to stay out of Court if possible.
Good debt collection solicitors will usually advise that negotiation, letters of demand, offers of compromise, and ADR should be considered first before filing a claim in the Court.
However, in some instances the debtor will just refuse to listen or respond to all reasonable requests, and so there may be no alternative than enforcing your legal rights in the Court with jurisdiction.
Commencing Legal Action
Commencing debt collection action in Court is done by filing an originating process which in most cases is a claim and a statement of claim.
Commencing debt collection action in QCAT is done by filing an application for minor civil dispute.
Once these documents are filed and have a seal, the creditor will need to serve the defendant / respondent with the documents.
Once served the debtor will have 28 days to file a defence or a response.
The matter with then proceed to either a trial in Court or a hearing in QCAT. It is a lot more complicated that this, but this gives you the general idea.
Debt Recovery Lawyers Tip 4 – Engage a Debt Recovery Lawyer
If you are going to Court, then it is vital that you engage suitably qualified and experienced debt collection lawyers to prepare the initiating documents.
There can be serious cost consequences if you do not plead your case correctly and in accordance with the Uniform Civil Procedure Rules 1999 (Qld) (“the UCPR”).
It is important that you get it right from the start and engage debt collection lawyers to help you obtain a judgment or enforceable money order.
The purpose of Court or QCAT proceedings is to obtain an enforceable money order which can then be enforced over the property of the judgment debtor.
If you get a QCAT decision, it has to be registered in the Magistrates Court before it can be enforced.
An enforceable money order can be enforced through the Court by obtaining an enforcement warrant. Enforcement warrants can include:
- A warrant for charging orders;
- A warrant for redirection of debts;
- A warrant for redirection of earnings;
- A warrant for seizure and sale of property;
- Order for payment by instalments; and/or
- Regular redirections from financial institutions.
Debt Recovery Lawyers Tip 5 – Do Searches to see if the Judgment Debtor has Property
A judgment creditor, or their debt collection lawyers, should do some extensive searches to see if the judgment debtor owns any property which can be used to satisfy a judgment debt.
Some of these searches include:
- Searches of the database at the land titles office to see if the debtor owns real property;
- Searches of the Personal Property Securities Register to see if there is encumbered property in their name;
- Facebook and online searches to see vehicles (cars, boats, jet skis); or
- Engage a private investigator to conduct searches of other databases.
If searches come up empty, then you will need to summon the judgment debtor to an enforcement hearing.
If the judgment debtor is a company then an alternative enforcement option is to issue the company with a creditor’s statutory demand.
Issuing Statutory Demands
A statutory demand is a demand by a creditor on a company to pay its debts.
Apart from the temporary legislation enacted because of COVID-19, usually a debtor company will have 21 days to do one of the following:
- Pay its debts;
- Secure or compound for the debt; or
- Make an application to set the demand aside.
If they do not do these things within the required time, then the company will be presumed to be insolvent, and with this presumption of insolvency assisting a judgment creditor can apply to wind up the company.
Debt Recovery Lawyers Tip 6 – Negotiate a Payment Plan
The legal presumption of insolvency last for three (3) months from non-compliance with the statutory demand.
The statutory demand has already done its job, so during this time you are free to negotiate with the judgment debtor to reach a resolution without extinguishing the statutory demand.
The threat of the foreshadowed winding up application is great leverage to get the debtor to pay the debt and some costs.
If they do not pay the debt by around two (2) months and two (2) weeks, then you can make the winding up application.
You need to get advice from an experienced lawyer before doing this as there are some downsides (unfair preference payments, for example).
If the company debtor does not pay the debt, then you can make a winding up application.
Winding up Applications
This is incredibly serious for the debtor company and the directors of the company, who may be personally liable for the debt in some instances.
Once the winding up order is made then a liquidator is appointed to the company, and it is slowly brought to a close, payments made to creditors (if any) and finally the company is deregistered.
Debt Recovery Lawyers Tip 7 – Give Information to the Liquidator
Director’s of companies in liquidation are not always honest with the liquidator.
If you have any information which may assist the liquidator the you should pass it on to then to assist then to realise as much money as possible.
If the judgment debtor is a real person and not a company then you can also start the bankruptcy process for an insolvent person by issuing a bankruptcy notice.
Issue a Bankruptcy Notice
Bankruptcy is commenced by issuing the judgment debtor with a bankruptcy notice.
Similar to a statutory demand, a bankruptcy notice is a demand for money giving the judgment debtor 21 days to do any of the following:
- Pay the debts contained in the bankruptcy notice;
- Enter into an arrangement to pay the debt; or
- Make an application to set the bankruptcy notice aside.
If they do not do these things, then they will have committed an “act of bankruptcy” allowing a judgment debtor to present a creditor’s petition in the Federal Circuit Court.
Debt Recovery Lawyers Tip 8 – Do not Enter into an Arrangement before 21 Days
A bankruptcy can be satisfied by entering into an arrangement with the creditor for payment of the debt.
However, it is the entering into the arrangement which satisfies the bankruptcy notice, and not the adherence to that arrangement.
In Deputy Commission of Taxation v Catanese (1999) 42 ATR 247 Kenny J said:
I accept that, if a creditor and a judgment debtor enter into an arrangement to the creditor’s satisfaction for the settlement of a debt prior to the time limited for compliance by a bankruptcy notice, the creditor cannot rely on the bankruptcy notice to found an act of bankruptcy … That is so whether or not the judgment debtor subsequently honours the arrangement.
The act of bankruptcy lasts for 6 months, so wait until after the 21 days and then start negotiating.
If the judgment debtor still does not pay, then before the expiration of 6 months of the “act of bankruptcy” you can present a creditor’s petition in the Federal Circuit Court.
A creditor’s petition is the initiating document to commence bankruptcy proceedings.
A creditor’s petition must also be supported by a number of affidavits attesting to searches of the Court records, and to the fact that the debt is still outstanding and unpaid.
If the judgment debtor does not try to set the creditor’s petition aside, the Court will make an order that the debtor’s estate be sequestered, and a bankruptcy trustee appointed.
The trustee’s job is to realise as many assets as possible and attempt to make a payment to creditors of the bankrupt.
Debt Recovery Lawyers Tip 9 – Give Information to the Bankruptcy Trustee
Bankrupts are not always honest with the trustees. In fact, I read this morning that a bankrupt was sentenced to two (2) years in prison for providing the trustees a fraudulent Statement of Affairs.
Any information about the bankrupt’s financial affairs will greatly assist the bankruptcy trustees and may result in more money being realised.
Of course, most of the above may be avoided with correctly drafted credit contracts.
Drafting Credit Contracts
Debt collection solicitors can also draft credit applications and loan / credit contracts.
A credit contract must contain as a minimum the following:
- A clause providing for default interest;
- A clause providing for default and breach;
- A clause providing for legal & debt collection costs upon default;
- A clause providing for personal / director’s guarantees; and
- A clause providing for security for the debt.
If you have a well drafted contract when entering into an agreement with a debtor, then you can save time and money on Court action; recover more than you would; simply realise security; and make a director or third-party personally liable for the debt.
Debt Recovery Lawyers Tip 10 – Always have Well Written Contracts
As debt collection lawyers, we see daily the problems associated with not having good legal instruments, or not having contracts at all.
It is vitally important that you have proper legal documents protecting you if something goes wrong.
Visit – Contract & Credit Application
Debt Recovery Lawyers in Queensland
This article gives you basic fundamental information in relation to legally recovering debts.
It is a lot more complicated that it appears. This is why we strongly recommend getting qualified debt collection and enforcement advice from the qualified lawyers at Stonegate Legal.
Debt collection lawyers do a lot more than simply recover debts.
A good debt collection lawyer knows the legal system, and can use this to form a strategic plan, to reach a commercial solution with a positive outcome.
Debt collection solicitors will attempt to negotiate first or engage in alternative dispute resolution, in an attempt to reach a settlement with the least amount of legal costs.
If this does not yield results, your debt solicitors can commence legal action to obtain an enforceable money order if needed. This can be for business debt recovery or personal debt collection.
Once the creditor has an enforceable money order, commercial debt collection solicitors can commence enforcement action to enforce the money order over the property of the debtor.
Commercial debt collection lawyers can provide advice and assistance in relation to the following:
- Negotiation & dispute resolution;
- Commencing legal action;
- Enforcing the judgment or money order;
- Other debt-related legal services.
This article will explore the above, and give you detailed information about the debt collection process.
What is a Debt?
Before we discuss the debt collection process, it is important to understand what a debt is.
A debt is defined in the dictionary to mean:
“something that is owed or that one is bound to pay to or perform for another” or “a liability or obligation to pay or render something” or “the condition of being under such an obligation”
So, a debt is liability or obligation to pay or render something from one person to another. Usually, unpaid invoices and commercial debt.
For a debt to be eligible for collection, it must also be owing, and due and payable.
The first step debt collection lawyers will explore will be negotiation and alternative dispute resolution.
Negotiation & Dispute Resolution
There are a number of alternatives to litigation in a debt collection lawyers’ arsenal.
Litigation can be very expensive, so negotiation and alternative dispute resolution are used to try to resolve disputes with the least amount of costs, in the shortest amount of time.
Negotiation and alternative dispute resolution methods include:
- Sending a lawyer’s letter of demand;
- Negotiating a settlement;
- Attending a mediation;
- Engaging in commercial arbitration;
- Preparing for an expert determination;
- Making an adjudication application; and/or
- Attending a conciliation.
I Will explain these in more detail below.
Debt Recovery Lawyers Letter of Demand
A letter of demand is the first step in the debt collection process.
A debt collection lawyers letter of demand, or overdue payment letter, should:
- State how much is owed;
- State what the debt is for; and
- State when the debt needs to be paid.
The debt collection lawyers letter of demand should also include information about the legal action that the creditor can take if the debtor does not pay.
You may be entitled to different types of legal action depending on the amount owed, and the entity you contracted with, so it is important to get this right.
Solicitors at a debt collection law firm will be able to provide advice and assistance in relation to this.
The main purpose of the letter of demand is to get payment from the debtor. However, another purpose of the letter of demand is start the negotiation process.
Debt Recovery Lawyers – Negotiating a Settlement
Debt collection lawyers are usually very skilled negotiators.
The debtor may be disputing the claim, or the amount of the debt, so there may be some room to negotiate a settlement.
In most cases, it makes more sense to negotiate a settlement amount than trying to litigate through the Courts. This is because a creditor / plaintiff will never recover 100% of their legal costs, and there will almost always be a deficit.
With this being the case, a reasonable compromise to settle the matter early, and save the time and costs of litigation, is a good idea.
Without Prejudice Offers
Negotiating a settlement is usually done on a without prejudice basis.
Without prejudice offers are inadmissible attempts to encourage parties to settle their dispute without the matters raised in these negotiations being used against them, or to their prejudice in the course of proceedings.
Sometimes called Calderbank offers, so called because of the case which gives them their name Calderbank v Calderbank  3 All ER 333, they are genuine attempts to compromise the debt (accept a reasonable lesser amount).
If negotiation does not work, then a creditor may have to opt for a different form of dispute resolution.
Debt Recovery Lawyers Attending a Mediation
The mediator is an independent person who helps the parties work out the issues in a dispute and then finds a solution that everyone can agree to.
The purpose of the mediation is to negotiate a settlement which will usually be put into a deed of settlement.
The deed of settlement is a legally binding agreement which outlines the nature of the agreement reached and the responsibilities and liabilities of each of the parties.
Arbitration is form of alternative dispute resolution outside of the Courts.
The parties involved pick an independent person called the arbitrator who acts as the judge.
The arbitrator will make a decision which is legally binding and final for both you and the other parties involved.
The Court can order arbitration by consent of both parties and is suitable for:
- financial and debt collection matters; and
- property settlement and debt matters.
Expert determination is when the parties agree to have their dispute determined (resolved) by an expert, who is an independent third party.
The expert can be a lawyer but is often a person with an expertise in the area in dispute such as a forensic accountant, licensed engineer, or construction expert.
The parties will usually enter into an expert determination agreement and will agree that the determination will be binding on them.
This will be used for building and construction disputes, for example.
Debt Recovery Lawyers Adjudication Application
Another alternative dispute resolution technique used in the building and construction industry is adjudication.
An adjudication application is a great way to quickly recover debts without the cost of commencing Court action.
From service of the BIFA payment claim, an adjudicator can have a decision to the adjudication application in around 10 weeks.
Once registered in the Court, the adjudication certificate becomes an enforceable money order in the Court and can be enforced as if it were a judgment of that Court.
An application for adjudication can be a timesaving, cost-effective way of recovering building and construction debts.
However, there is a very strict process which must be followed. Read our article on making an adjudication application.
Attending a Conciliation
Conciliation is similar to mediation.
There’s an independent person called a conciliator (usually an expert in the dispute subject) who helps the parties involved in a dispute work out issues so there’s a resolution.
A conciliator will work to find a solution to the dispute and are actively involved in finding the best solution.
A conciliator will look at any weakness as well as any strengths of your arguments, but don’t actually resolve the dispute for you.
Conciliation is mostly used in industrial or workplace disputes and will be relevant in relation to wage theft claims, unpaid wages and entitlements.
If Alternative Dispute Resolution does not Resolve the Dispute
Sometimes a debtor will be particularly stubborn, or they think that they are acting on principle, or they just don’t have any money to pay the debt.
If this happens, then a creditor has no choice but to instruct their debt collection lawyers to commence legal action.
Commencing Legal Action
Debt collection solicitors will draft the pleadings, file in the Court, deal with interrogatories and applications, deal with disclosure, and prepare for trial if needed.
It can be a very complicated process which needs to be done correctly, so it is vital to engage qualified debt collection solicitors if you are thinking about legal debt collection.
Debt solicitors will do the following:
- Commence legal action in the Court with jurisdiction; or
- Commence legal action in the Tribunal.
We will explain the process in more detail below.
Commence legal action in the Court
In relation to debt collection proceedings, different Courts have different monetary jurisdictions.
- The Magistrates Court can hear debt matters up to $150,000.00
- The District Court can hear debt disputes from $150,000.00 to $750,000.00
- The Supreme Court can hear debt disputes over $750,000.00
A proceeding is mostly commenced by claim and statement of claim.
There are filing fees also payable to the Court for filing the claim.
Once filed the claim and statement of claim will need to be served on the debtor.
Service of an Originating Process
A document that commences proceedings in the Court is called an originating process.
An originating process is required to be personally served on a debtor / defendant.
Personal service is effected on a company by posting it by pre-paid post to the registered office of the company.
Personal service is effected on a person by handing it to them personally, amongst a few other ways.
Once served the debtor / defendant will have 28 days to file and serve a defence to a claim.
If a defence is not filed, then the creditor / plaintiff can ask the court to give them judgment in default.
Defences to Debt Recovery Claims
If a defence is filed, then there are a number of ways in which a defendant can defend a debt collection claim. These most commonly include:
- There is a dispute about the quality / quantity of the goods and/or services provided;
- Any breach of contract by the creditor / plaintiff;
- If there is any offset or counterclaim the defendant has against the plaintiff;
- The debt is outside of the limitation of action and is statute barred;
- If the alleged debt is not actually a liquidated debt, but actually damages;
- The plaintiff engaged in misrepresentation or misleading & deceptive conduct.
These are just a few examples of how a debt may not actually be owed, or the quantum of the debt may not actually be owed.
If the defendant does file a defence, then the matter will proceed to trial, unless the matter settles before that happens.
A creditor / plaintiff can also commence debt collection proceedings in the Tribunal.
Commence legal action in the Tribunal
People commonly refer to the minor civil disputes jurisdiction as the “small claims court”.
As well as the Magistrates Court, the small claims jurisdiction is the Queensland Civil and Administrative Tribunal – also known as QCAT (“QCAT”).
QCAT has jurisdiction to hear minor debt claims of up to $25,000.00.
The process in QCAT is very similar to the court process above, just less formal. A creditor files and serves a minor debt application and then personally serves it on the debtor.
The debtor files a response, or they do not.
The end result in QCAT is to get a decision from the tribunal for a monetary amount, then register that decision in the Magistrates Court for enforcement.
Register a QCAT Decision
Rule 793 of the UCPR says:
enforceable money order of a court, means – a money order of the court; or a money order of another court or tribunal filed or registered under an Act in the court for enforcement
Schedule 3 of the UCPR defines an order to mean:
“order” … includes a judgment, direction, decision or determination of a court whether final or otherwise.
An enforceable money order is a money judgment from the Court, or a decision in QCAT or an adjudication decision registered in the Magistrates Court.
A QCAT decision or an adjudication decision that has not been registered in the Court is not an enforceable money order.
The purpose on commencing legal action in the Court or the Tribunal is to get an enforceable money order.
An enforceable money order is an money order of the Court which is enforceable over the property of the debtor.
Enforcing the Judgment or Money Order
There are a number of ways in which a debt collection law firm can advise and assist a judgment creditor enforce a money order.
Debt collection solicitors will guide you through the debt enforcement process.
Good debt solicitors will help you enforce the money order through the Courts or with insolvency.
The debt enforcement options are:
- An enforcement warrant;
- A creditor’s statutory demand and winding up; or
- A bankruptcy notice and creditor’s petition.
I will explain these in more detail below.
An Enforcement Warrant
An enforcement warrant is a warrant (or order) from the Court allowing the attachment to property of the judgment debtor.
The enforcement warrants can attach to personal property, cash, or debt.
There are a number of different types of enforcement warrant, they include:
- Enforcement warrants for seizure and sale of property;
- Enforcement warrants for redirection of debts;
- Regular redirections from financial institutions;
- Enforcement warrants for redirection of earnings;
- Order for payment of order debt by instalments; and/or
- Enforcement warrants for charging orders.
I will explain these in more detail below.
Enforcement Warrants for Seizure and Sale of Property
An enforcement warrant for seizure and sale of property is a warrant authorising the bailiff to seize and sell the property of the judgment debtor.
This property can include the debtor’s house, cars, boats, etc.
See out article on Enforcement Warrants for Seizure and Sale of Property
Enforcement Warrants for Redirection of Debts
An enforcement warrant for redirection of debts allows the creditor to enforce an enforceable money order over any debts owed to the judgment debtor by a third person.
The redirection warrant confers the obligation on the third person to pay the debt to the judgment creditor rather than the debtor.
This can include money in the bank. Section 97 of the Civil Proceedings Act 2011 (QLD) says:
An amount standing to the credit of an enforcement debtor in an account in a financial institution is, for enforcing a money order, a debt payable to the enforcement debtor
So, an enforcement creditor can take money our of the bank account of the debtor.
See our article on Enforcement Warrants for Redirection of Debts
Regular Redirections from Financial Institutions
A warrant for regular redirection from financial institutions is a warrant directed toward a third person (the financial institution) for a redirection of a regular deposit paid by a fourth person.
This warrant attached to regular payments made into the bank account of the judgment debtor, such as commissions or any debt, belonging to the enforcement debtor, from the third person because of a regular deposit by the fourth person.
Enforcement Warrants for Redirection of Earnings
A warrant for redirection of earnings allows the creditor to enforce an enforceable money order over the wages or salary earned by the debtor.
A warrant for redirection of earnings is a warrant directed at both the debtor and the debtor’s employer, directing the debtor’s employer to pay part of the debtor’s wages or salary directly to the creditor.
See our article on Enforcement Warrants for Redirection of Earnings
Order for Payment of Order Debt by Instalments
An order for payment of order debt by instalments is exactly that, an order from the Court that the enforcement debtor pays the creditor by instalments.
Similar to a warrant, a judgment creditor would usually ask for an order for payment of the judgment debt by instalments when the creditor is prepared to take regular amounts of the debt repayments over a period of time.
Enforcement Warrants for Charging Orders
Only available in the Supreme Court (debts over $750,000.00) and so is a lot less common than the rest of the warrants above.
An enforcement warrant for a charging order is a warrant charging the enforcement debtor’s legal or equitable interest in annuities, bonds, debentures, interest in a managed investment scheme, marketable securities, shares, or stocks.
To enable a judgment creditor to get the information needed to obtain an enforcement warrant from the Court, the creditor may need to summon the enforcement debtor to an enforcement hearing.
An enforcement hearing is strictly an information gathering exercise.
If the debtor provides documents showing any assets is owns, the equity in those assets, and details of any debts owed to them, this method of enforcement has achieved its purpose, being gathering information to use to request an enforcement warrant.
This can include bank statements, mortgage pay-out figures, assets & liabilities, etc.
The first step is to give the debtor a written notice requiring them to complete a sworn statement of financial position. They have fourteen (14) days from receiving the notice to complete and return it.
If an enforcement creditor is not satisfied with the contents of the completed statement of financial position, or the debtor does not return one at all, a creditor can then apply to the Court for an enforcement hearing summons order.
An enforcement hearing summons order is a Court order requiring a debtor to complete a statement of financial position (if they have not done so), produce substantial documents regarding its financial position, and appear in Court for the purpose of being cross examined about its financial position.
However, in our experience, debtors rarely voluntarily reveal to the Court what assets they own that can be seized.
If a debtor is served with an enforcement hearing summons order at least fourteen (14) days before the date set for the enforcement hearing, but does not attend the hearing, the Court may issue a warrant for their arrest.
This can be a lengthy and expensive process, especially if the debtor is deceptive or not truthful.
See our article on Enforcement Hearings
In some cases, instructing debt collection lawyers to enforce the judgment debt with insolvency may be a better option.
A Creditor’s Statutory Demand and Winding Up
If the judgment debtor is a company then a creditor can issue the debtor company with a creditor’s statutory demand.
Failure to comply with a statutory demand raises the legal presumption that the company is insolvent.
With this presumption assisting, a creditor can commence proceedings to wind up the debtor company.
If the debtor company does not respond, then they are presumed to be insolvent and a creditor can take steps to wind it up in insolvency.
Once served, the debtor company will have 21 days to do any of the following:
- Pay the amount claimed;
- Secure or compound for the debt;
- Request that the demand be withdrawn; or
- Make an application to the Court setting aside the demand.
If they pay, or reasonably secure or compound (enter into an arrangement to pay) for the debt, then the statutory demand is extinguished.
If the demand is withdrawn or set aside, then the creditor may not get the amount demanded.
However, it is very difficult to set aside a statutory demand after a judgment.
There are lots of ways in which this process can be difficult, so it is very important to engage suitably qualified debt collection solicitors for advice and assistance with your statutory demand and winding up application.
If the judgment debtor is a person (not a company) then debt collection lawyers can issue the judgment debtor with a bankruptcy notice to start the bankruptcy process.
A Bankruptcy Notice and Creditor’s Petition
Bankruptcy proceedings are commenced by issuing a bankruptcy notice to the debtor.
To issue a bankruptcy notice, a judgment creditor must have:
- A judgment from a Court or registered Tribunal decision; and
- That judgment must be $10,000.00 or more; and
- The judgment must not be more than six (6) years old.
If a judgment creditor fits these criteria, the judgment creditor can serve the judgment debtor with a bankruptcy notice.
An application for a bankruptcy notice will cost a filing fee of $470.00 with the Australian Financial Security Authority (“AFSA“).
Once served with the bankruptcy notice, the judgment debtor will have 21 days in which to:
- Pay to the creditor the amount of the debt claimed; or
- Make arrangements to the creditor’s satisfaction for settlement of the debt; or
- Apply to the Court for an order setting aside the bankruptcy notice.
If the judgment debtor does not comply with the bankruptcy notice, or make an application for it to be set-aside, then they will have committed an act of bankruptcy, allowing you to file a creditor’s petition in the Federal Circuit Court.
It is best to engage debt collection lawyers to issue the bankruptcy notice and draft the creditor’s petition.
Enforcement by Debt Recovery Lawyers
These are a creditor’s enforcement options.
Good commercial debt collection solicitors will guide you through the process of enforcement to obtain the best result with the least amount of cost.
Good business debt collection solicitors will help you enforce all of your business debts such as unpaid invoices.
But this is not all that a debt collection law firm can do.
What Else do Debt Recovery Lawyers Do?
Debt collection lawyers do a lot more than simply recover debts.
Debt collection lawyers are litigation lawyers with a focus on debt recovery.
This means that debt collection solicitors have extensive knowledge in relation to the Court system, debt, credit, securities, and insolvency, including:
- Advising on contracts and/or credit applications;
- Advising on due diligence and credit worthiness of new clients;
- Advising on Mareva (freezing orders) in relation to property of the debtor;
- Comprehensive legal advice and assistance;
- Recovery against guarantors or company directors;
- Advising on execution of a judgement over land and assets of a debtor;
- Contested bankruptcy and winding-up proceedings;
- Advice and assistance on realising securities, charges or guarantees;
- Comprehensive searches including Internet searches, bankruptcy search, and company searches;
- Advice and assistance in relation to the correct guarantee, charge, or security to secure payment of goods and services;
- Advising on insolvent trading investigations;
- Advising on a liquidators or bankruptcy trustees voidable transactions claims;
- Advising on unreasonable director-related transactions claims; and
- A lot more.
Commercial debt collection solicitors will provide sound, timely, and commercial advice in relation to debts, securities, and insolvency.
Why Use Stonegate Legal – Debt Recovery Lawyers
Stonegate Legal are litigation lawyers with a focus on debt recovery, enforcement of money orders, securities, and insolvency.
Our debt collection lawyers have handled small to large debt recovery matters, in all jurisdictions in Queensland.
We are a debt collection law firm which puts the commercial needs of our client’s first to help them recover their hard-earned money.
Our debt collection solicitors are experienced in drafting letters of demand, negotiation, alternative dispute resolution, beginning the legal process by court action, obtaining judgment, enforcement of money orders by warrant and insolvency.
Our debt solicitors have acted for companies, debt collection agencies, individuals, trustees and liquidators. Our debt recovery lawyers act for both plaintiffs and defendants in Court and Tribunal proceedings.
Debt Recovery Lawyers FAQ
In the world of business, dealing with unpaid debts and uncooperative debtors is a common challenge. When these situations arise, it’s essential to have a clear understanding of debt collection processes and legal options.
This FAQ section aims to demystify the role of debt collection lawyers and their strategies to help businesses and individuals navigate the path towards reclaiming their rightful dues.
What do Debt Recovery Lawyers do?
Debt collection lawyers specialise in assisting clients to legally recover outstanding debts. They offer a range of services including negotiation with debtors, sending letters of demand, pursuing alternative dispute resolution, initiating legal actions, enforcing judgments, issuing statutory demands, handling bankruptcy and winding up applications, and drafting credit contracts.
Why is negotiation with debtors important?
Negotiation is often the first step in debt recovery. Debt collection lawyers utilise negotiation strategies to encourage debtors to pay, often by leveraging potential consequences like legal actions, bankruptcy, or seizure of assets. Effective negotiation can avoid costly court proceedings.
What is a letter of demand and why is it essential?
A letter of demand is a formal communication to the debtor outlining the debt and its consequences if not paid. Debt collection lawyers recommend sending a letter of demand as part of negotiation. Additionally, a “without prejudice” letter of offer (Calderbank letter) can be used to propose debt compromise without admitting liability.
What is Alternative Dispute Resolution (ADR)?
Alternative Dispute Resolution refers to methods of resolving disputes outside of the courtroom. Debt collection lawyers may suggest ADR methods such as BIFA adjudication, conciliation, arbitration, or mediation. ADR can help save time and costs compared to traditional litigation.
When should legal action be considered?
While negotiation and ADR are preferred, legal action may be necessary when debtors refuse to cooperate. Debt collection lawyers can guide you through commencing legal action, whether through the Court or Queensland Civil and Administrative Tribunal (QCAT).
How can judgments be enforced?
Debt recovery lawyers help obtain enforceable money orders from court proceedings. These orders can be enforced using various methods, such as charging orders, redirection of debts, seizure and sale of property, and more.
What is a statutory demand, and when is it used?
A statutory demand is a demand for payment issued by a creditor to a company. If not complied with, it can lead to the presumption of insolvency, potentially resulting in winding up proceedings. Engaging debt recovery lawyers to issue a statutory demand is recommended.
How does bankruptcy apply to debt recovery?
For individuals, bankruptcy can be pursued through a bankruptcy notice. If a debtor fails to comply within the specified timeframe, a creditor’s petition can be filed in the Federal Circuit Court, initiating bankruptcy proceedings.
What role do debt recovery lawyers play in drafting credit contracts?
Debt recovery lawyers can draft comprehensive credit contracts that protect creditors’ interests. Well-drafted contracts include provisions for default interest, breach, legal and debt collection costs, guarantees, and security for the debt.
Why is having well-written contracts important?
Properly drafted contracts provide a legal framework that helps prevent disputes and ensures debt recovery procedures are clear and effective. Having well-written contracts can save time, money, and potential legal complications.
How can I benefit from consulting with debt recovery lawyers in Queensland?
Debt collection lawyers at Stonegate Legal are qualified professionals who provide specialised guidance in recovering debts, navigating legal complexities, and maximising your chances of successful debt collection while adhering to the legal framework.