It is an unfortunate fact that in business life, at some stage, a customer will owe you money.
When talking to clients about their instructions to chase a debt, we often find they are surprised at the number of steps involved and the length of time it could take to see any money.
What you can do to get your money first depends on who the customer is and the amount of debt owing. After that, it is a commercial decision as to how much you are prepared to spend to chase the debt and what assets may be at the end of the chase to collect from. Here is a run down on what debt can be chased where and how.
Claiming the debt
Debts up to $10,000 — For any debt under $10,000 owed by an individual or company, a claim can be filed in the ACT Civil & Administrative Tribunal that incorporates the former Small Claims Court. If the debt relates to NSW, the claim is filed in the Small Claims Division of the NSW Local Court.
Alternatively, if the debt is owed by a company, is due and payable, is over $2,000 and is undisputed, then the Corporations Act 2001 (Cth) permits a statutory demand to be issued to the debtor. A debtor served with a creditor’s statutory demand has 21 days from service to either pay the debt or apply to a court to have the demand set aside before the debtor company is presumed to be insolvent and you can apply to wind it up.
A creditor’s statutory demand is not the way to pursue a debt if the debt is disputed in any way and no matter whether you disagree with the grounds of dispute.
Debts up to $250,000 — Claims for debts in the ACT up to $250,000 are made in the ACT Magistrates Court. In NSW, claims up to $100,000 are made in the General Division of the Local Court, and claims for debts up to $750,000 are brought in the NSW District Court (there is scope to increase this amount). Again, a creditor’s statutory demand may be used to pursue an undisputed debt against a debtor who is a company.
Debts over $250,000 — Claims for debts in the ACT over $250,000 are made in the ACT Supreme Court. In NSW, debts over $750,000
are pursued in the NSW Supreme Court. A creditor’s statutory demand remains available for use against a debtor company on an undisputed debt.
In any court, a claim against multiple parties can be made for the same debt. For example, the debtor company may be sued for payment of outstanding invoices in respect of goods supplied, and the directors of that company also sued for the debt under personal guarantees they gave for the company.
After service of the sealed court documents, the debtor will have a court-specified number of days to respond to the claim by either filing a defence disputing the claim or paying the debt. If a defence is filed, the case will progress through the various steps to get to hearing before a judicial officer. If a defence is not filed within time, you can apply to the court for default judgment against the debtor.
For more information contact the Dispute Resolution Team: