If a creditor believes you owe money and you have not paid, chances are the creditor will want to recover the money and in doing so, may serve you with a letter of demand or Magistrates’ Court Complaint. The biggest mistake you can make is to ignore it. Here are some effective tips on how to respond:
Responding to a letter of demand
A letter of demand is usually the first step a creditor will take to try and get you to pay them money. The letter may say how much money is owed, why the money is owed, when the money should have been paid, when the money needs to be repaid and what the creditor will do. You can respond multiple ways including:
- If you do not dispute the claim, contact the creditor and attempt to negotiate an agreement for payment on a “without prejudice” basis. This means the letters and email sent between you and the creditor as part of your negotiations cannot be used as evidence if negotiations fails and a claim is later made in court.
- Deny that you owe the money. Be aware that if a creditor does not accept your denial, they may commence legal proceedings against you to recover the money.
- Carefully check the letter and if there are any matters that are unclear or if further information about the alleged debt is required, write to the creditor (and keep a copy of the letter). Double check money amounts and dates to make sure they are correct. It is important that you do not write anything in the letter that admits you owe the money and you were at fault. Also, make dated notes of any telephone conversation you have with the creditor.
- Seek legal advice if the claim is disputed or if you are unsure if you owe the money.
Responding to a Magistrates’ Court Complaint
A court case about a debt is commenced with a document called a Complaint which incorporates a Statement of Claim. A Statement of Claim is a factual description of why the money is owed to the plaintiff (the party who commences legal proceedings against you). The Statement of Claim must describe:
- The date when the debt arose;
- The place where the debt arose; and,
- A full description of the event(s) that demonstrate why the money is owed, set out in numbered paragraphs with as much detail as possible.
Here are some helpful ways to respond:
- If a Complaint refers to dates, events or conversations that you cannot recall or recognise, you can write to the Plaintiff and ask them for more information. This is more commonly known as a “request for further and better particulars”. Without this pertinent information, it may be difficult to ascertain if you do owe the money and it will also be hard to prepare your Defence if you decide to defend the claim.
- If you agree with the claim, you can pay the amount owed to the plaintiff.
- You can try to negotiate directly with the plaintiff. The plaintiff may agree to withdraw the court claim if an agreement is reached about payment.
- If you do not believe you owe all or part of the money claimed, you must file a court document called a Defence. A Defence states that you deny owing all or part of the money claimed and sets out the reasons why. The Defence must be filed with the court within 21 days of being served with the Complaint, otherwise the plaintiff can apply for default judgment against you.
- If you believe the plaintiff in fact owes you money, you may wish to lodge a Counterclaim no later than 21 days after a Defence has been filed and served.
If you have been served with a letter of demand or Magistrates’ Court Complaint and would like some further advice, please contact Senior Litigation Lawyer, Lynda Lim, for a full and frank discussion.
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