How to Use Litigation to Collect Debts in Victoria

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How to Use Litigation to Collect Debts in Victoria

How to Use Litigation to Collect Debts in Victoria
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If traditional debt collection methods fail, legal action may be necessary. Debt Recoveries Australia only recommends legal action if the amount owed exceeds $5,000.00 and if the debtor or company has assets to satisfy the debt. These two criteria form the foundation of their work. Once they are satisfied that the legal action criteria have been met, they refer the case to their legal team at ADC Legal Litigation Lawyers. 

Many people often inquire about the legal process involved in debt recovery. They want to know how it begins. The process starts with small claims court actions filed against individuals, partnerships, companies, or corporations. These actions are effective in recovering small sums of money owed to individuals or businesses. 

This article provides an explanation of the small claims debt recovery process in Victoria, Australia. 

The first step is to determine if the claim is legally enforceable. To pursue funds through small claims debt recovery, the debt must be legally enforceable, and it should not fall under the authority of the National Credit Code or the National Consumer Protection Act of 2009.  

Next, a demand letter should be composed. This letter serves as the initial step in initiating a small claims case and can be sent before filing any paperwork with the court. The letter should demand the owed money while ensuring that the person who owes the money is not harassed. It is crucial to maintain truthfulness and transparency in the demand letter and avoid any misleading or deceptive language. 

Negotiation is prioritized at Debt Recoveries Australia to collect the money without resorting to legal action. When the debtor responds to the demand letter, efforts should be made to negotiate payment before pursuing legal action. If the debtor pays the owed money, small claims recovery is no longer necessary. However, if the debtor does not pay immediately, a payment plan can be discussed. In cases where payment is not received and a viable payment plan cannot be established, writing off the debt may be considered. Writing off the debt allows for a tax deduction and is a suitable option for small debts. 

If an agreement cannot be reached with the debtor, filing a claim with the local small claims tribunal becomes an option to recover the money. In Victoria, these claims can be filed in either the Magistrates’ Court or the Victorian Civil and Administrative Tribunal (VCAT).  

Choosing between the Magistrates’ Court and VCAT depends on the specific circumstances. Claims below $100,000 and less than six years old can be filed in the Magistrates’ Court. The Magistrates’ Court is recommended for small debt recovery outside the Melbourne metropolitan area or for cases that do not fit into the VCAT categories. 

When debts fall under the Australian Consumer Law and Fair Trading Act of 2012 (ACLFTA), VCAT is the appropriate venue. Typically, these debts are related to goods or services. Filing under the ACLFTA provides various potential remedies, but there are limitations, such as filing fees, no-cost shifting, and no available remedy for disputes that arose prior to September 1, 1999. 

Recovery of the owed money is likely whether it is achieved through demand letters or by filing claims in the Magistrates’ Court or VCAT. If the Magistrate or the VCAT Tribunal Member issues an order in favor of the creditor, the debtor is legally obligated to repay the debt. In some cases, the debtor may be required to pay interest and a portion of the creditor’s legal fees.  

Knowing that Victoria has mechanisms in place to assist creditors in recovering owed debts can alleviate some of the stress associated with debt collection. In addition to filing a small claims action, hiring a professional debt collector like Debt Recoveries Australia to manage and collect past-due debts is worth considering. 

If you have any further questions, please contact our Legal-Litigation Lawyer Nikola Fratric on (03) 9999-1122 or by email 


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