Debt Recovery Basics

If you are owed money for goods or services, Callea Pearce can help you get it back. The first step in attempting to recover your money is generally to send a letter of demand to the other party setting out the amount of money outstanding and giving them a defined period of time within which to settle the matter or face legal action.

Letter of Demand 

The letter of demand is sent by the person owed the money (the creditor) or by us (your lawyer) and usually warns the person owing the money (the debtor) that if they don’t pay the debt within a certain time period (often seven days) they will be sued in court to recover the debt. A letter of demand is often the last letter you will send before issuing court proceedings. While letters of demand are not court documents they are often an effective means of forcing the debtor to take action.

Please CONTACT US prior to proceeding to determine whether it is feasible for us to chase up the debt for you. This will usually depend on the size of the debt.

Principles of debt collection fairness 

When sending a letter of demand, you should be careful not to harass the debtor or send a letter which is designed to look like a court document. The Australian Competition and Consumer Commission (ACCC) stipulates that you should treat debtors and third parties with fairness, respect and courtesy. You should never harass or coerce them, treat them unconscionably or mislead them about the nature of their debt, their legal obligations or any possible outcomes if the debt is not paid. You should not pursue a person for a debt unless you have reasonable grounds for believing the person is liable for the debt. We can advise you on all of these issues to ensure your claim is fair.

Time limits 

You have a limited period of time to sue for a debt. If the debtor has made no payments towards the debt and has not acknowledged in writing that they owe the debt for a period of six years then the debt may not be recoverable. So don’t delay in coming to see us for advice.

Disputed debts 

The debtor has the right to dispute a debt and may do so on the grounds that:

  • it is not their debt
  • they have already paid the money
  • they disagree with the size of the debt
  • it is an old debt and they haven’t made a payment for at least six years, no court judgment has been entered against them and they haven’t admitted in writing that they owe the debt in that time.

If the debt is disputed then you may have no alternative but to commence legal proceedings or to seek to negotiate a compromise with the debtor.

What happens if we get involved 

If you, as the creditor, are not willing to negotiate or wait for payment, you may engage us to pursue the debt. If you know the debt is due and payable and you want to commence legal proceedings, it is important you see us as soon as possible. If the size of the debt does not warrant our involvement, then we may still be able to help you to negotiate a payment plan that is manageable to the debtor and acceptable to you. It is not in the debtors interest to ignore your claim and risk the additional costs of legal fees and interest on top of the original sum claimed. We can help bring the matter to a faster conclusion.

Credit application process for your customers

Before you take on a new customer you must have the correct systems in place to ensure that you are able to assess the customer’s credit position.

Do you have a credit application process for your new customers?

Does your credit application provide you with security over the goods which you have sold to the customer and, if the customer is a corporate entity, have you ensured that the directors of the company have provided you with Director’s guarantee?

If you do not have a system in place then CONTACT US and we will advise you as to how to put systems in place to protect your debt. It is important that you have the correct systems and documentation in place before you take on a new customer and before you provide the customer with credit to ensure you have the best chance of recovering any money owed to you.


It is worth your while to check with us about your legal rights and obligations if you are owed money – provided the debt is of sufficient size. If you or someone you know needs assistance with debt recovery or implementing credit applications, please don’t hesitate to CONTACT US or drop in to one of our offices. Callea Pearce Lawyers has offices located in Melton Werribee and Bacchus Marsh .


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