In the perfect world, loans are repaid on schedule without any complications. However in light of the global financial crisis, debt is plaguing the business market more than ever.

Reports issued by the ACCC and ASIC indicate that the third party debt collection industry manages approximately $6 billion of unpaid debt in Australia each year. To avoid your business forming part of this statistic make sure you take steps to avoid debt and act quickly if it arises.

A Fast Recovery is a Good Recovery

The longer a debt remains unpaid, the greater chance you won’t be able to recover it. It is reported by tax accountants  that up to 90% of debts can be resolved when a prompt legal letter is sent to the debtor.

But don’t wait too long! According to a leading Collection Agency, your chances of recovering a debt that is more than 90 days old is only 73 %. After six months, these chances plummet to 57%. For those who leave debts outstanding for a year, the outcome is bleak with only 29% of debts being successfully recovered.

When debts go stale...

If you leave it long enough, your outstanding debts will become statute barred and all hope of recovery is lost. To prevent this from occurring you must issue proceedings within the relevant court within six years of the debt being due for payment.

What’s the best way to recover your debts?

The first step you should take to recover your debt is to establish that your debtor has the capacity to pay. If you can discuss issues they may be facing you might be able to work out an alternative payment strategy that can benefit the both of you.  In any event, you should call the debtor to inform them of their late payment. It is possible that their overdue payments are a result of simple human error or a defect in their administrative system- perhaps they have not received their invoice or have misunderstood when their payments are due. If you don’t receive payment from them after this, you should send out a reminder letter.

During this process you should endeavour to maintain customer relationships and act in a professional manner. For professional debt collectors, the ACCC and ASIC have imposed standards of conduct that prohibit harassment and unconscionable conduct in order to obtain payment.

My attempts have proven unsuccessful... what next?

The nice reminders and polite requests for payment have come to no avail, and now you want your money. The next step is to issue and serve a summons. Read on to find out the benefits of doing so and how Law Central can make this process as pain-free as possible.

Issuing a summons can compel a debtor to pay up for a number of reasons. In addition to the nicety of avoiding court proceedings, debtors may not wish to damage their credit ratings. Having debt claims against your name doesn’t look good to creditors and will make it difficult to obtain future finances.

But make sure you get it right! Summons can be set aside if they are defective- avoid the risk of this occurring by using Law Central’s Summons Document which you can build online.

If you end up in court...

Gold and Platinum members read on to find out what court you’ll need to make a claim in to recover your debt. For claims in the district and higher level courts, such as the Supreme Court, it is recommended that you obtain legal advice. The following guidelines relate to debt recovery matters only and may not apply to other claims.

Preventing debt in the first place:

In the case of debt recovery – prevention is far better than cure. Gold and Platinum members read on to find out how to avoid the sticky situation of recovering payments that are long overdue:

In summary your best option is to take preventative measures to avoid debt. However, if debt arises deal with it as quickly as possible! Communicate with your debtor in a direct and professional manner and if it boils down to it take action when necessary.

Related Documents

• Demand & Statement of Claim for Debt - NSW
• Demand & Summons for Debt - NT
• Demand & Summons for Debt - TAS
• Demand & Summons for Debt - VIC
• Demand & Summons for Debt - WA