What can I do if somebody owes me money?

Wednesday, 7 September 2022

What can you do if someone owes you money and will not pay up?

Before you seek legal help, you should do all you can to ‘encourage’ the debtor to pay you — send them a firm but polite letter that makes it clear what the amount of the debt is, what it is for, and by when you require payment. If you are a business, make it easy for your customers to pay their bills — consider whether you should have a range of payment options­, such as direct deposit, credit card or BPAY.

If all else fails you may need to start legal proceedings, and your solicitor will be happy to help you. Find all the papers you have that relate to the debt and take them to your solicitor. If you don’t have a solicitor, you can contact the Law Society and ask for a referral.

Sometimes a letter of demand from a solicitor’s office, prior to commencing any legal action, can work wonders. You may be able to resolve the problem by the debtor paying the debt immediately or over a period agreed by you in negotiations.

If you engage a solicitor, you will be responsible for their fees regardless of whether you recover money from the debtor. You should ask your solicitor whether the cost is worthwhile, bearing in mind the amount of the debt, the likelihood of obtaining judgment, the limited amount of costs recoverable, the costs you may be required to pay if you are unsuccessful, and the prospects of enforcing any judgment.

You must act against the debtor within six years from the date on which the debt arose. After that you may find that your claim is ‘statute barred’, that is, out of time.

If you do have to start proceedings, your solicitor will advise you about which is the right court or tribunal to go to. If your dispute is in the ACT, you will go to one of the following:

ACT Civil and Administrative Tribunal (ACAT) — If the debt is up to $25,000 you will usually start proceedings in ACAT. If you act for yourself, the staff of ACAT will assist you to issue a claim. In most cases no legal costs are awarded to either party in ACAT. ACAT seeks to resolve matters in an informal way and will call the parties in for a conference to try to settle the dispute before a case goes to hearing.

Magistrates Court — Disputes over debts of up to $250,000 are generally dealt with in the Magistrates Court. Here and in the Supreme Court, once the court has decided the case it can make orders for the unsuccessful party to pay the other party’s legal costs (although usually not all of those costs).

Supreme Court — Disputes above $250,000 are heard by a judge in the Supreme Court.

Issuing a claim

Your solicitor will commence proceedings by filing an ‘originating claim’ and ‘statement of claim’ with the Court­ — in ACAT the document is called a ‘civil dispute application’. Your solicitor will arrange to have a copy served personally on the debtor.

Default procedures

If the debtor does not contest the claim within 28 days of being served with the claim, your solicitor can apply to the Court for judgment. The Court may make a judgment in your favour, converting your claim into a judgment debt which can be enforced by execution through the court’s sheriff.

A default judgment can be set aside by the Court if the debtor has a valid explanation why the claim was not defended in time. In that case, the Court will normally allow a defence to be filed within a certain time. The Court may order the debtor to pay costs, however this is not guaranteed.

What if a claim has been made against you?

If you are served with a claim you have several options.

If you owe the debt, you should pay the debt if you can, to avoid incurring any further costs.

If you owe part of the debt but not the whole debt, your solicitor can file a document admitting the amount you are prepared to pay — the creditor may accept that amount, or if not, the court will decide the matter. Otherwise, judgment will be entered against you for the amount admitted.

In many cases your solicitor can help by negotiating an agreement between you and the creditor, which can provide for payment of a lower amount than the initial claim, and/or terms for payment over a period of time.

If you dispute the whole debt, your solicitor will file with the court a ‘Defence’ and have the dispute heard by the court.

You may have a counter-claim against the person suing you; for example, if you are unwilling to pay for defective goods. If you have any claim against the creditor — even if it arises out of something else — you may seek to set-off that claim against the creditor’s claim.

The Hearing

If the claim is defended, and the parties cannot settle the dispute by negotiation, then the Court or Tribunal will set a date for hearing. Either party can appear in court on their own behalf but it is usual to be represented by a solicitor.

If you do not appear, the Court or Tribunal can dismiss or adjourn the case. If one party does not appear, the other may obtain judgment by default.


If the Court gives judgment against the debtor either by default or following a hearing, the amount that the debtor has to pay, including court costs, becomes a judgment debt and is payable immediately. Interest accrues from the date of the judgment.

Where a judgment debt is not paid

You have several options available to enforce a judgment debt. Your solicitor will advise you which course to take.

If you are unsure about the debtor’s assets or income, your solicitor can issue an Enforcement Hearing Subpoena against the debtor requiring them to attend at the Court to be examined about their financial position.

You can obtain a Debt Redirection Order directing the debtor’s employer or bank to attach the debtor’s wages or other funds due to them.

You can apply to the Registrar for a Seizure and Sale Order ordering a Sheriff to take and sell the debtor’s goods to satisfy the judgment debt unless the amount stated in the order is paid.

You can commence bankruptcy proceedings against the debtor by requesting your solicitor to serve a Bankruptcy Notice on them.

Where the debtor is a company

You can follow the Court procedures as above to obtain and enforce a judgment against a company. Alternatively you may issue a demand on the company under the provisions of the Corporations Act 2001 (Cth) as a preliminary step to placing the company in liquidation. Your solicitor will be able to advise you on the best course to take.

Finding help

If in doubt, consider obtaining legal advice. The Law Society can help you find a private lawyer or refer you to pro bono services that can assist with your matter.

  • Online search: Find a law firm (select 'Debt recovery' from 'Areas of practice')
  • Online search: Find a lawyer
  • Call the Law Society on 02 6274 0300 and we can put you in touch with a lawyer or a firm who can help you

Related Links