Debt recovery lawyers do a lot more than simply recover debts.
A good debt recovery lawyer knows the legal system, and can use this to form a strategic plan, to reach a commercial solution with a positive outcome.
Debt recovery 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 recovery.
Once the creditor has an enforceable money order, commercial debt recovery solicitors can commence enforcement action to enforce the money order over the property of the debtor.
Commercial debt recovery 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 recovery process.
Debt disputes can be managed effectively if they are dealt with quickly. Contact our debt recovery lawyers today.
What is a Debt?
Before we discuss the debt recovery 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 recovery lawyers will explore will be negotiation and alternative dispute resolution.
Negotiation & Dispute Resolution
There are a number of alternatives to litigation in a debt recovery 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 recovery process.
A debt recovery 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 recovery 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.
Check out our FREE letter of demand checklist
Solicitors at a debt recovery 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 recovery 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 [1975] 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.
Commercial Arbitration
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 recovery matters; and
- property settlement and debt matters.
Expert Determination
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 recovery lawyers to commence legal action.
Commencing Legal Action
Debt recovery lawyers can commence legal action in the Court or Tribunal to recover a debt.
Debt recovery 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 recovery.
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 recovery 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.
The Claim is form 002 and the statement of claim is form 016.
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 recovery 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 recovery 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 recovery 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.
Enforcement Hearing
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 payout 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, enforcing 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 recovery solicitors for advice and assistance with your statutory demand and winding up application.
Read our complete guide on issuing creditor’s statutory demands
If the judgment debtor is a person (not a company) then you 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 recovery 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 recovery solicitors will guide you through the process of enforcement to obtain the best result with the least amount of cost.
Good business debt recovery solicitors will help you enforce all of your business debts such as unpaid invoices.
But this is not all that a debt recovery law firm can do.
What Else do Debt Recovery Lawyers Do?
Debt recovery lawyers do a lot more than simply recover debts.
Debt recovery lawyers are litigation lawyers with a focus on debt recovery.
This means that debt recovery 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 recovery 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 recovery lawyers have handled small to large debt recovery matters, in all jurisdictions in Queensland.
We are a debt recovery 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 disputes can be managed effectively if they are dealt with quickly. Contact our debt recovery lawyers today.
Wayne Davis, LLB, GDLP – Commercial litigation solicitor and legal practice director at Stonegate Legal Pty Ltd. Stonegate Legal focus on commercial litigation, debt disputes, the enforcement of money orders, and insolvency. Committee member of the Sunshine Coast Law Association.
