Debt recovery – how to regain what’s rightfully yours
By Jane Blackburn, Commercial Litigation Lawyer
Avoiding the recovery of a business debt is like giving your money away to someone who hasn’t earned it.
Obtaining money you are owed is something a business owner can rarely afford to ignore. It’s your money. You earned it. You deserve it. And chances are you need it.
But it’s rarely as straight forward as simply asking for the debt to be paid. There are only so many (often ignored) phone calls you can make. And many of us were raised to think it’s bad manners to even talk about money, let alone ask for it.
However, that awkwardness of having to ask for what is rightfully yours should not prevent you from doing so. Getting someone else experienced in this process to help you do it can help make it less unpleasant – and more successful.
Engaging a lawyer’s help to recover debt does NOT have to be an expensive process. For starters, there’s a good chance you will get what you are owed – and therefore end up in a better position than when you started.
But it’s also worth considering for the peace of mind; not unlike the saying, ‘a problem shared is a problem halved’.
Recovering a business debt is, to a lawyer, a fairly black and white process. The steps we would typically follow to recover a business debt are as follows:
- We gather all the information
First, we review the paperwork. We need to be sure you’ve got a legal right to chase down this missing money. We want to verify the amount that is owed and that the debt is now overdue, based on your trading terms. We are also keen to see if there’s a dispute about how much is owed, or there’s already been a payment arrangement made.
- We’ll send a letter
We will draft and send a letter of demand, giving the non-paying business (we call them a ‘debtor’), a short period of time to make the payment. Seven to 14 days is standard.
- Serve a statutory demand
If your debt is over $2,000 and there is still no response, then we will serve a Statutory Demand on your behalf. This is a demand in accordance with the Corporations Act. It gives the debtor 21 days to pay. If payment is not made, or if you don’t reach a payment arrangement you are happy with, then the business that owes the money is deemed to have breached that statutory demand. That means that you, as the business owed the money, can commence wind-up proceedings of the business that is in debt.
- Wind-up Proceedings commence; company is in insolvency
This is a last resort. And one that can only be done with the help of a lawyer. We always aim to have the issue solved before we reach this point. But on occasion, it’s a necessary step we need to take. If that’s the case with your situation, rest assured we will work through this with you to make sure it runs as it should.
Like everything, there ARE exceptions to rules. For example, the process outlined here is followed when a company owes you money. It does not apply if the debtor is an individual – such as a person, partnership, sole trader, or any other operation that doesn’t have an ACN. That’s a different process altogether – and one we can discuss another day.
It’s also a different process if your debt is less than $2,000. There’s no statutory demand or wind-up proceedings – but there are still ways the court can help you secure what you are owed. Once again, it’s still worth getting help to recover your money.
What’s important to remember is that debt recovery is like mending something after it has been broken. Think about what you can – and should – put in place at the beginning of a business relationship, to ensure you have the best chance of recovering any debts if and when the unthinkable happens and a business doesn’t pay. Getting expert help is a good way to ensure the best possible outcome, even before you start doing business.
Contact Jane Blackburn to discuss what you can do about recovering a business debt, or phone Maddens Lawyers on 1800 815 228.