Debts can arise in many ways, including the following:

• Contracts: For example, your business was contracted to carry out work for another business and the invoice you sent for the work you were engaged to do remains unpaid.
• Private loans
• Loans and credit cards
• Bills for utilities such as electricity, phone and internet services, or Council rates.


Trying to recover a debt can be stressful and time-consuming. Before taking steps to recover a debt you should make sure that the debtor is aware that you are owed money. Occasionally invoices go astray or someone forgets the arrangement they had made with you to pay you a certain amount. It is important that you send both first and second reminder letters (especially if you are a business) and/or send emails, make phone calls etc. to the person or organization that owes you the money in order to try and recover the debt. Should the debt remain unpaid and you decide to head to court, evidence you have performed the above steps will strengthen your case.
If initial efforts to recover your debt prove fruitless, a common way to make a claim for money owed is to send a Letter of Demand. You can send a letter of Demand yourself or ask a lawyer to write it on that firm’s official letterhead; this will let the debtor know you are serious about pursuing the debt.
A Letter of Demand states the specific amount that is owed, will remind the debtor how and why the debt was incurred and will mention when the invoice needs to be paid. It may also include a warning of what action you will take if the debt remains unpaid by a certain date. If you still cannot recover your debt resolve you may opt to head to Court.
The specific Court where you file your claim depends on the amount you are owed. The local court has two divisions to determine civil cases: (1) the Small Claims Division hears claims up to an amount of $10,000 and (2) the General Division hears claims over an amount of $10,000 (and up to $100,000). Beyond that, notice that debts over $100,000 and up to $750,000 are brought in the District Court of New South Wales; furthermore, debts over $750,000 must be recovered in the state’s Supreme Court.
Once court proceedings have been finalized and a judgment is obtained in your favour, there are a number ways in which the judgment can be enforced. These include:
– Garnishee Order, whereby the Court can order a third party, for example, the employer of the debtor, to pay money directly to the person who is owed the debt instead of the debtor. Common ways of proceeding this way are to attach an Order to the debtor’s bank account in order to recover monies owing, or to serve an Order upon the debtor’s employer so that monies are removed from the debtor’s wages to fulfil the debt.
– Examination Notices whereby the debtor is required to attend Court to display how he/she will satisfy the judgement).
– A Writ for Levy of Property can be issued against you. This Writ allows a Sheriff’s Officer to remove items (“personal property”) from a debtor’s home or office to pay the debt (note there are limits on what the Sheriff Officer can remove).
– A severe option is to have the debtor declared bankrupt provided that the debt owed is at least $5,000. To do this you must make an application to the Federal Circuit Court or Federal Court. If the debtor is a company rather than an individual, an application can be made to the Supreme Court to have that company wound up.


The worst thing you can do is to ignore the pursuer. To do so can have serious consequences, such as adversely impacting on your financial credit-rating or being subject to court orders with costs against you.

If you receive a phone call or correspondence from someone or an organization saying that you owe a debt, you should try and resolve the matter as soon as possible, otherwise a Statement of Claim may be filed against you and a sometimes lengthy and costly court process could ensue.

If you agree that you do owe the debt, you can either pay the amount owed in full or if you do not have the money available to pay immediately, you can try and discharge the debt by paying in instalments. If the creditor (the person or organization who is owed the debt) agrees to this, it is best to make a formal, written agreement with them.
Should you be genuinely unable to keep up with repayments on a credit card or loan (for example, a car or home loan), contact your credit provider as soon as possible and let them know you are experiencing financial hardship. You have a legal right to seek a hardship variation. This is a formal process where you ask your credit provider to vary the terms of your loan contract so that the repayment may be less burdensome.

If you do receive a document called Statement of Claim, you must take action within 28 days of receiving it, because it means the other party has started a court case against you to try and recover the debt owed. If the facts presented in the Statement of Claim are correct and indeed you do owe the money as stated, then you should file a Statement of Response with the court and serve it on the creditor.

When you are given a date to attend Court in respect of the Statement of Claim, and the Court subsequently makes an order that you must pay that debt, then that “judgment” against you remains in force for at least 12 years. Therefore, the judgment creditor has at least 12 years to take further action to recover money owed by you.
You also have the option of declaring bankruptcy. This is a process where people who cannot pay their debts give up their assets and control of their finances, either by agreement or court order, in exchange for protection from legal action by their creditors. We believe this is a very serious option to take and only to be done as a last resort because of the serious impact it may have a number of aspects of your life, such as your ability to obtain future credit or travel overseas and even any right to take or continue legal action.

You should be aware that under the Australian Consumer Law, there are laws about what someone or some organization can or cannot do to recover a debt. Essentially the pursuers cannot: use physical force or coercion against you; harass you to an unreasonable extent; mislead or deceive you; or take unfair advantage of any vulnerability, disability or other similar circumstances affecting you. These laws also apply to a debt collector’s conduct towards your family members or someone else connected with you.

Our experienced lawyers at AZ Legal can assist you with all aspects of debt. 

Disclaimer: The content of this publication is general in nature and for reference purposes only. It is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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  • Since 20-05-21
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