Recently we have been focussing on how to reduce your credit risks, promote cash flow deal with debtors during the COVID-19 crisis. However it remains a possibility that with some debtors, legal action may be the only the only course of action to secure your recovery. The courts are open and operating on reduced or amended schedules during this time, and most importantly, your rights to be repaid for monies owed have not changed so it is important you assess all options available to you.
If the usual debt collection efforts have failed, the next step can be legal action. Here at Debt Recoveries Australia, we will generally only recommend legal action if the amount owing is above $5,000.00 and we know the debtor or company have assets to satisfy the debt. There are a few other factors to consider, but these are the two bases we work from. Once we are satisfied that the criteria for legal action are met, we refer the matter to our legal team at ADC Legal Litigation Lawyers.
We are often asked, what is the legal process? How does it start?
Firstly, small claims are actions that are brought in court against an individual, a partnership, or even a company or corporation. These actions can be brought to successfully recover small sums of money that are owed to you or your company.
This article explains the process of small claims debt recoveries in Victoria, Australia.
- Determine if your claim is legally enforceable.
In order to collect money through small claims debt recovery, the debt itself must be legally enforceable. Additionally, the debts cannot be controlled by the National Credit Code or the National Consumer Protection Act of 2009.
- Write a demand letter.
The first step in bringing a small claims case is to write a demand letter. This can be done before you file anything with the court. In your letter, make a demand for the money you are owed, but be careful not to harass the person who owes you money.
Additionally, be sure not to make your demand letter look like it is coming directly from the court. It is important to be honest and transparent, not misleading or deceptive.
Here at Debt Recoveries Australia, our first priority is to collect the money without having to resort to legal action. Therefore, when the debtor replies to your letter, always try to negotiate to get payment before you start legal action.
If the debtor pays the money owed, then congratulations! You have no further need for small claims recovery. If, however, the debtor does not immediately pay, you can try to set up a payment plan with the debtor. If the debtor does not pay the debt and you are unable to create a successful payment plan, you might consider writing the debt off. Writing off the debt entitles you to a tax deduction, which makes this a viable option for very small debts.
- Heading to the Small Claims Tribunal.
If you are unable to reach a positive determination of the debt owed to you, you can bring an action in the local small claims tribunal to recover the money through legal means. Here in Victoria, these claims can be brought either through your Magistrates’ Court or through the Victorian Civil and Administrative Tribunal (VCAT).
- Deciding between the Magistrates’ Court and VCAT.
Each venue serves a different purpose. Claims that are under $100,000.00 and are not more than six years old may be brought before the Magistrates’ Court. Magistrates’ Court may be the best option for those people attempting to recover small debts outside of the Melbourne metropolitan area, or for people who are not contained in the VCAT categories.
VCAT is used when debts fall under the Australian Consumer Law and Fair Trading Act of 2012 or ACLFTA. Usually, the debts involve goods or services. Filing under the ACLFTA allows for many potential remedies, however, there are restrictions on ACLFTA claims, including filing fees, no-cost shifting, and no available remedy for disputes that arose before 1 September 1999.
Whether you recover your money at the demand letter stage, or choose to initiate claims either through Magistrates’ Court or VCAT you will likely be able to recover the money owed to you. If the Magistrate orders that the debtor pay you, that order is legally enforceable.
Similarly, the VCAT Tribunal Member is empowered to make legally enforceable determinations of responsibility. If either the Magistrates’ Court or the VCAT enter an order in your favour, the debtor is legally obligated to repay the debt. In some cases, they will be ordered to pay interest and some of your legal costs as well.
Trying to collect on a debt is always stressful, however, knowing that Victoria has mechanisms in place to help creditors recover debts owed can help eliminate some of that stress.
In addition to bringing an action in small claims, you may also consider outsourcing to a professional debt collector such as Debt Recoveries Australia to professionally manage and collect on overdue debts or directly to a trusted legal services practitioner like ADC Legal
If you have more questions on legal small claims recoveries in Victoria, need, contact us at at Debt Recoveries Australia on 1300 799 511. You may also email me at email@example.com or Skype at debtrecoveries.
Call Us: +61 1300 799 820