If traditional debt collection methods fail, legal action may be necessary. We will only recommend legal action at Debt Recoveries Australia if the amount owed exceeds $5,000.00 and we know the debtor or company has assets to satisfy the debt. There are a few other factors to consider, but these are the two foundations on which we work. When we are satisfied that the legal action criteria have been met, we refer the case to our legal team at ADC Legal Litigation Lawyers.
What is the legal process, we are frequently asked? How does it begin?
To begin, small claims are court actions brought against an individual, a partnership, or even a company or corporation. These actions can be used to successfully recover small sums of money owed to you or your business.
This article explains the small claims debt recovery process in Victoria, Australia.
- Determine whether or not your claim is legally enforceable.
To obtain funds through small claims debt recovery, the debt must be legally enforceable. Furthermore, the National Credit Code and the National Consumer Protection Act of 2009 have no authority over the debts.
- Compose a demand letter.
A demand letter is the first step in filing a small claims case. This can be done prior to filing any paperwork with the court. Make a demand for the money you are owed in your letter, but be careful not to harass the person who owes you money.
Additionally, avoid making your demand letter appear to be sent directly from the court. It is critical to be truthful and transparent, rather than misleading or deceptive.
- Negotiate.
Our first priority at Debt Recoveries Australia is to collect the money without resorting to legal action. When the debtor responds to your letter, always try to negotiate payment before taking legal action.
Congratulations if the debtor pays the money owed! You no longer require small claims recovery. If the debtor does not pay right away, you can try to work out a payment plan with him or her. If the debtor does not pay and you are unable to come up with a viable payment plan, you may want to consider writing off the debt. Because writing off the debt entitles you to a tax deduction, this is a good option for small debts.
- Taking your case to the Small Claims Tribunal.
If you are unable to reach an agreement with the person who owes you money, you can file a claim with your local small claims tribunal to recover the money. In Victoria, these claims can be filed in either your Magistrates’ Court or the Victorian Civil and Administrative Tribunal (VCAT).
- Deciding between the Magistrates’ Court and VCAT.
Each location serves a distinct function. Claims of less than $100,000 that are less than six years old may be brought before the Magistrates’ Court. For those attempting to recover small debts outside of the Melbourne metropolitan area, or for those who do not fit into the VCAT categories, Magistrates’ Court may be the best option.
When debts fall under the Australian Consumer Law and Fair Trading Act of 2012, or ACLFTA, VCAT is used. Typically, the debts are for goods or services. Filing under the ACLFTA provides many potential remedies; however, there are limitations on ACLFTA claims, such as filing fees, no-cost shifting, and no available remedy for disputes that arose prior to September 1, 1999.
- Recovery.
Whether you recover your money through demand letters or by filing claims in Magistrates’ Court or VCAT, you will most likely be able to recover the money owed to you. If the Magistrate orders the debtor to pay you, the order is legally binding.
Similarly, the VCAT Tribunal Member has the authority to make legally binding determinations of responsibility. If the Magistrates’ Court or the VCAT issues an order in your favour, the debtor is legally required to repay the debt. In some cases, they will be ordered to pay interest as well as some of your legal fees.
Trying to collect on a debt is always stressful, but knowing that Victoria has mechanisms in place to assist creditors in recovering owed debts can help alleviate some of that stress.
In addition to filing a small claims action, you may want to consider hiring a professional debt collector, such as Debt Recoveries Australia, to manage and collect on past-due debts.
If you have any further questions about legal small claims recoveries in Victoria, please contact ADC Legal at 1300 820. You can also contact me via email at email@adclegal.com.au.