Debt Recovery

Creditors engage lawyers in Debt recovery matters to assist in recovering an amount of money that is owed by a party to another party. The money referred to as a debt may be related to the payment of money for  a goods or services or another type of transaction.

Letters of demand

The initial action in relation to seeking payment of a debt is for a creditor send a letter of demand to the debtor. This requests the debtor to pay back the money owed to the creditor within a certain time frame, failing which the creditor will take legal action.

If no answer is received to a letter of demand, or if the debtor answers but refuses to pay back the money, you can begin to take steps to recover the debt through the courts and tribunals.

Which court or tribunal you commence proceedings in will depend on the amount of the debt owing to you, and the basis of the accrual of the debt.

Victorian Civil and Administrative Tribunal

A debt recovery matter may be initiated in the Civil Claims List at the Victorian Civil and Administrative Tribunal (VCAT) if it relates to a consumer and trader dispute or some other limited circumstances.

In VCAT matters that involve a debt of less than $10,000, parties are not permitted to have legal representation at VCAT hearings with leave of the tribunal. In some matters, VCAT may make an order for costs, but sometimes costs orders are not made.

Magistrates Court or Supreme Court

The Magistrates Court has jurisdiction hear debt recovery matters involving debts of less than $100,000, whilen the Supreme Court is not limited in jurisdiction. It requires a form 5A to be completed and served on the other party.

The debtor then has 21 days from receiving service to either pay the claim or decide to defend the matter by filing a form 8A. If they do not respond within the 21-day period, a default judgement entered against the defendants.

Once the defendant has filed and served the response, the court will often organise a pre-hearing conference to try and resolve some or all of the issues in dispute. It may also transfer the matter to VCAT if it considers that the matter would be better handled there.

If the pre-hearing conference does not resolve the matter, it will then proceed to a hearing at which the matter will be decided by a magistrate. The magistrate will decide on the balance of probabilities, whether the debt is owed or not..

Time limit

It is important to note that under the Limitation of Actions Act 1958, a debt recovery matter must be commenced within six years of the date the debt arose. If an order is granted, then there is generally fifteen years to enforce the order form the date the order was made.