Free yourself from debtors this new year

The start of a new year is an excellent time to refresh your finances. Our team at DE have put together five tips that can help you free yourself from debtors.

The start of a new year is an excellent time to refresh your finances. Our team at DE have put together five tips that can help you free yourself from debtors:

  1. Negotiate terms of settlement. It may be the case that a debtor is simply unable to pay a debt as and when it falls due, and the amount of the debt may not warrant the expense of formal legal action. In such circumstances, you may negotiate different terms of settlement whereby you accept a discounted amount in a relatively short period of time to settle the matter, or alternatively extend the payment terms (and perhaps introduce an instalment plan) for full payment, with or without interest.
  2. Letter of demand. The threat of legal action in the form of a formal ‘7 day letter of demand’ can often prompt a debtor to pay up. A letter of demand on our firm’s letterhead can often be very effective, particularly as it canvasses interest accruing on the debt, as well as anticipated legal costs which would be sought against the debtor in addition to the principal owing.
  3. Magistrates’ Court proceedings. If a debtor is disputing the debt and/or is refusing to pay, you may commence proceedings in the Magistrates’ Court by filing a Complaint against the debtor (and claiming the costs of doing so against the debtor, together with interest accrued on the debt). If the debtor subsequently files a defence, then the Magistrates’ Court will often list the matter for mediation before a Court-appointed registrar. If no resolution can be reached at that stage, the matter proceeds to a hearing and is ultimately decided by a Magistrate. The vast majority of Magistrates’ Court proceedings settle well before the matter reaches a final hearing,  but if the proceedings do reach that final stage, then and the unsuccessful party is usually liable to pay the successful party’s legal costs calculated according to the Court scale. The Magistrates’ Court can determine most disputes over money or property up to the value of $100,000.
  4. Statutory demand for payment of debt. If your debtor is a company (as opposed to an individual), the amount of your debt is $2,000 or more, and there is no genuine dispute about the existence of this debt, then you may issue a Creditor’s Statutory Demand for Payment of Debt, requiring the debtor to pay the debt within 21 days. Non-compliance with a statutory demand can have serious and expensive consequences on a debtor company, because that company’s failure to pay the demanded amount may be deemed to be “an act of insolvency” thereby exposing the company to winding up proceedings.
  5. Bankruptcy Notice. If your debtor is an individual (as opposed to a company), the amount of your debt is $5,000 or more, and you have obtained an order or final judgment against your debtor, then you may issue a Bankruptcy Notice, requiring the debtor to pay the debt or to come to a satisfactory arrangement with you within 21 days. Non-compliance with a Bankruptcy Notice can have serious and expensive consequences on an individual, because it would give you grounds to apply to the Federal Circuit Court for an order that the individual be made bankrupt (called a sequestration order).

Please contact Steve Dangerfield, Angela Catanzariti or Lynda Lim of our litigation team for more information or a complimentary and frank consultation on your business debt needs.

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