Sunshine Coast Debt Recovery – by Wayne Davis Lawyer
If you run a business on the Sunshine Coast then you will inevitably have bad debts from time-to-time. More-so if you offer goods and/or services on trade credit.
Debt collection can be a long stressful experience and may not yield results at the end.
The debt recovery process usually involves the following:
- Letters of demand and alternative dispute resolution;
- Commencing legal action;
- Enforcement of a money order.
This article will give you information, hints, and tips on debt recovery on the Sunshine Coast, and offer some best practices to increase your chances of getting paid.
Letters of Demand
A letter of demand is a demand for money which puts the debtor on notice of pending legal action. The letter of demand is a tool to essentially negotiate payment of the debt and resolve the matter quickly and at the minimal of expense.
A letter of demand foreshadows legally action that a creditor is able to take if the demand is not met. A creditor must be mindful not to foreshadow any action which they are not able to take, for example issuance of a statutory demand or bankruptcy notice if the amounts are below the statutory minimums prescribed by their respective legislation.
If you can resolve the matter with a letter of demand then that is great. However if a debtor does not pay the debt, then you may need to think about an alternative.
Alternative Dispute Resolution
Alternative dispute resolution (“ADR”) is a further attempt at resolving a debt dispute without resorting to litigation.
Litigation can be time consuming and expensive. If you can resolve your dispute without that time and cost then this might be a better option for you.
You can attempt mediation for example, where an independent third-party attempts to guide the parties into resolving the dispute.
Alternatively, you could attempt without prejudice negotiations in an attempt to compromise. Without prejudice negotiations mean that parties attempt to agree to an offer in an attempt to settle a dispute without prejudice to your legal rights.
Sometimes however debtors just refuse to pay. If a creditor wants to recover the debt, then they must commence legal action.
Commencing Legal Action
A creditor can commence legal action in the Court with jurisdiction, or in the Queensland Civil and Administrative Tribunal (“QCAT”).
The monetary jurisdictions of the Courts and tribunal are:
- QCAT – minor debts of up to $25,000.00;
- Magistrates Court – debts of up to $150,000.00;
- District Court – debts between $150,000.01 and $750,000.00; and
- Supreme Court – debts over $750,000.01.
The litigation process is commenced by claim or application. Depending on the jurisdiction a creditor/plaintiff/applicant will need to plead, respond to pleading, provide full disclosure, attend conciliation, mediation, or settlement conferences, and ultimately if the matter does not settle, attend at a trial.
Ultimately the end result is to be given an enforceable money order by the Court or Tribunal. A judgment of the Court in a debt dispute is an enforceable money order. Also, a decision in QCAT and registered in the Court is an enforceable money order.
Once you have this order, you are able to commence enforcement proceedings.
Enforcement of a Money Order
There are a number of ways in which you can enforce a money order, they include:
- Obtaining an enforcement warrant; or
- Issuing a statutory demand and winding up application; or
- Issuing a bankruptcy notice and bankruptcy proceedings.
We will discuss these in more detail below.
There are a number of different enforcement warrants that a debtor can apply for.
An enforcement warrant for seizure and sale of property allows the Court bailiff to seize the property of the debtor and sell it. This is usually vehicles and real property.
An enforcement warrant for redirection of earnings is a warrant addressed to a judgment debtor’s employer ordering them to redirect part of the debtors’ wages to satisfy the order.
An enforcement warrant for redirection of debts is a warrant directed at a debtor of the debtor ordering them to pay the debt which is payable to the debtor, to you.
Issuing a Statutory Demand
A creditor of an insolvent company is able to issue a statutory demand to the debtor company.
The creditor can issue a statutory demand whether there is a judgement or not.
The statutory minimum for issuing a statutory demand is $2,000.00.
A statutory demand gives the debtor 21 days to do either of the following:
- Pay the amount of the debt or debts; or
- Secure or compound for the debt; or
- Request that the issuer withdraw the demand; or
- Make an application to set the demand aside.
The purpose of a statutory demand is to raise the legal presumption that the debtor company is insolvent. This presumption will assist in an application for an order winding the company up in insolvency.
Winding Up Application
A winding up application is an application to the Federal Court or the Queensland Supreme Court for an order winding up the debtor company in liquidation.
If the order is given, then a liquidator will be appointed to bring the affairs of the company to an end and realise assets to be able to make payments to company creditors.
Winding up applications are very complicated and should only be made by experienced legal practitioners.
If you have a judgment of $5,000.00 or over then you can apply to the Australian Financial Security Authority (“AFSA”) for a bankruptcy notice.
Once served with the bankruptcy notice a debtor will have 21 days to pay the debt or attempt to set the bankruptcy notice aside.
Failure to do so is an “act of bankruptcy” which allows the creditor to present a creditor’s petition to the Federal Circuit Court.
The creditor’s petition is an application asking for a sequestration order, which is an order making the debtor bankrupt.
Once bankrupt, a trustee is appointed to manage the estate of the bankrupt and attempt to realise assets to pay the debtor’s creditors.
Debt Recovery Sunshine Coast
If you have a debt dispute on the Sunshine Coast, or you need advice or assistance in relation to any of the above, contact Wayne Davis on 07 5444 4750 or [email protected].