Four Stages of Debt Collection in Australia

Are you trying to recover debt that is owed to you? In the preliminary stages of recovering debt owed, it is important to understand the different stages of debt collection, and where best to turn to for assistance.

It’s always best to engage a debt recovery lawyer (and to do it early!), rather than a mercantile agent or debt collector. Lawyers that specialise in debt recovery will be able to assist you with the collection process end-to-end, whereas debt collectors are only able to help with the early stages of attempted recovery. Furthermore, debt collectors tend to charge commission based on the dollar amount of the debt owed – specialised lawyers do not.

To help you understand the steps you may need to take in order to recover debt owed to you, we have outlined the four stages of debt collection in Australia below.

Letter of Demand

A Letter of Demand can be issued to an individual or a business, and is a formal document making a final demand for payment of outstanding debt.

Sending a Letter of Demand is a way to let the debtor know that you are intending to take legal action if payment is not made in a timely manner. 7 days is usually the given timeframe for a response.

This letter is the final stage before pursuing a court case, so it’s important that you have already sent reminders for payment and attempted to contact the indebted party via phone and email to come to an agreement.

It’s always a good idea to engage a solicitor who specialises in debt recovery when beginning this process. Letters of Demand have more weight when they come directly from legal firms, as they show that you mean business. Debt collectors and mercantile agents will not be able to assist beyond this point, as the next stages of the debt collection process require legal support.

Statement of Claim

The next stage of the debt collection process is lodging a Statement of Claim. This is a document prepared by a licenced solicitor and filed in court on your behalf. Once this has been done, the dispute has officially entered the legal system and the case will be scheduled for hearing.

The purpose of a Statement of Claim is to outline the details of the debt that is owed to you, any proof that supports your claim, as well as why you’re taking legal action. After being prepared and submitted, this document will be served to the indebted party (now ‘the defendant’), by the court, and they will be required to respond within a given time-period (usually 28 days).

If the defendant decides to pay or settle at this stage, they can ask you to withdraw your Statement of Claim, allowing both parties to avoid going to court. If they continue to refuse to pay, or they fail to respond, the dispute will proceed to court for judgement.


Once it is established that the dispute is to proceed, the court requires both parties to submit any documentation relevant to the case, to support any claims or defences. The court may even subpoena documents, such as phone or bank records.

There will then be mediation through a preliminary trial. This is an informal setting where the plaintiff, defendant and their legal representatives come together in an effort to resolve the dispute with the help of a third-party, unbiased facilitator.

If the mediation fails and an agreement is unable to be reached, the matter will proceed to trial. This is where both parties will need to give evidence to prove their claim. Judgement will be delivered by the court after all arguments have been heard and assessed.

Trials can be lengthy and costly, which is why resolution through mediation is always strongly encouraged. It can take over a year for a judgement to be reached by the court, however, once a decision is made, your lawyers will be notified.


If the court rules in the plaintiff’s favour, the defendant will then be required to pay the amount due. However, if the debtor ignores or violates the court order, the creditor is responsible for enforcing the original judgement. This can be done any time within twelve years from the date judgement was given.

There are a few options available to creditors when enforcing judgements made by the courts for payment – some of these will change depending on state/territory:

Examination summons

This requires the debtor to provide details of their financial position to the court, which in turn helps the creditor assess the most effective way to recover their funds.

Garnishee order

A court order that acts to have the debtor’s money directed straight to the creditor. This is often done through their income or existing bank accounts.

Writ for levy of property 

A court order that requires the Sheriff to seize and sell the debtor’s property in order to pay off the debt.

Debt collection in Australia can be tricky and time-consuming if you start out on your own. Engaging a debt collection lawyer from the beginning simplifies the process and means you get end-to-end support with your claim. Here at Woods & Day Solicitors, we offer a DEBT APPRAISAL service to help get you started with the recovery process. Get in touch today!

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