How to Recover a Debt

How to Recover a Debt – Useful Tips

Are you owed money? Debts can arise in both personal and business relationships and can cause financial hardship and stress. Here are some simple steps you can take to get paid, without having to resort to debt collectors or lawyers.

Contact Debtor to Discuss Reasons for Non-payment

When someone owes you an outstanding debt, they often try to avoid you. Therefore, the first thing you need to do is communicate. Get to the bottom of why they are not paying. Is it because they are not happy with the goods or services you provided? Are they disputing the amount that is owing? Or are they undergoing financial hardship and are unable to come up with the money?

Once you get to the reason behind the failure to pay, you may be able to reach a resolution or compromise. Bear in mind that people are much more likely to respond if you are reasonable.

Send a Letter of Demand

If the debtor (the person owing the money) is not responding, or continually promising payment and not coming through with it, you may need to send a formal demand for payment of the debt.

A letter of demand advises the debtor of the amount of the debt, and provides one last opportunity for them to pay, before you take them to court. In many cases, debtors respond to such action.

Here is a good template for a Letter of Demand. However, while a specific format is not required, you will need to include:

  • the full amount of the debt;
  • copies of any invoice, agreement or other document that proves the amount that is owing;
  • a time limit within which to pay the debt (for example, 14 days is usually considered reasonable);
  • instructions as to how payment should be made; and
  • a warning that legal proceedings will be commenced if payment is not received by the specified deadline.

A formal letter of demand for payment should always be made before you institute legal proceedings to show the court that you have already made reasonable attempts to recover the debt.

Small Claims Recovery Action

New South Wales

In New South Wales, the Small Claims Division of the Local Court hears debt claims of less than $10,000. More information can be found on the New South Wales Local Court website.


In Victoria, debt disputes up to and including $10,000 are heard as small claims by the Victorian Civil and Administrative Tribunal (VCAT). More information about this process can be found on the VCAT website.


In Queensland, debt disputes up to and including $25,000 are heard by the Queensland Civil and Administrative Tribunal (QCAT).

You can apply to have QCAT decide your dispute by filling out and lodging an application which is available on the QCAT website. Within 28 days of filing your QCAT application, you will have to serve a copy on the debtor who will then have an opportunity to respond to what you have said.

You and the debtor will then receive a notice to attend mediation, so that you can attempt to settle the dispute. If you can’t reach an agreement, a hearing will be scheduled and the matter will be decided by a QCAT member.

More information about this process can be found on the QCAT website.

Enforcing a Judgement

Just because a tribunal member decides the matter in your favour doesn’t mean you are going to get paid. You may need to “enforce” the judgement.

A decision made by a tribunal has the same weight as a court ruling and can be enforced as such by the Magistrate’s Court.

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