Damon Mcknight
If a friend owes you money, there are several steps you can take to try and recover it. Firstly, you should try contacting them to resolve the dispute—this can be done via phone, email, SMS, or letter. If this is unsuccessful, you may want to consider sending a letter of demand, which informs the debtor of the amount owed and warns them of potential legal action if it is not paid. If you still don't receive a response, you may need to lodge a claim in your state or territory's court or Civil and Administrative Tribunal, depending on the amount owed. It's important to be aware of the time limits for starting a court case to recover a debt, which is typically six years from when the debt was last acknowledged.
| Characteristics | Values |
|---|---|
| First step | Send a demand letter for full payment in 14 days |
| Demand letter sent via | Registered mail |
| No response to demand letter | Lodge a "minor debt claim" with your state or territory's Civil and Administrative Tribunal |
| Debt amount | Less than $25,000 in Queensland or the ACT, less than $10,000 in the Northern Territory |
| For larger debts | Magistrates Court can hear disputes up to $150,000 in Queensland, $100,000 in South Australia and Victoria, and $250,000 in the ACT |
| For even larger debts | Higher courts |
| Claim document | Details of the debt, including date and place, amount, terms of the agreement, supporting documents, and evidence |
| Before going to court | Try contacting the other party to resolve the dispute via phone, email, SMS, or letter |
| Time limit to start a court case to recover debt | Six years from when the money became owed, when the last repayment was made, or when the debt was last acknowledged in writing |
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What You'll Learn
Send a demand letter
If you are owed money by a friend, you may wish to send them a demand letter. This is a formal document used to demand payment from an individual or business that owes you money. It is a serious step to take and should be used when other attempts to recover the money have failed.
Demand letters are useful because they allow debtors to pay their debts while maintaining goodwill. They also serve as a formal warning that you will commence legal proceedings if you are not paid. An effective demand letter should include the amount of outstanding debt, the date the debt was due, the date of the letter, a description of the debt, and any relevant evidence of an agreement with the debtor.
It is recommended that you send two or three demand letters before beginning any court action and that you provide a reasonable timeframe for the debtor to pay, such as 7-21 business days. Sending a demand letter can have its disadvantages, however. It may inflame the dispute, and the other party may respond negatively, ignore you, or even start legal action against you.
If you decide to send a demand letter, you can write it yourself or engage a lawyer to write it for you. Most law firms charge a set fee for this service, which can be relatively inexpensive and effective. Make sure you send the letter by registered post and request a 'signed proof of delivery' card.
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Lodge a minor debt claim
To lodge a minor debt claim in Australia, you need to complete and file an 'Application for a minor civil dispute – consumer dispute' using Form 01. You can obtain these forms and a free guide from the Queensland Civil and Administrative Tribunal (QCAT) office in Brisbane, from any Legal Aid Office, or from the QCAT website. The minor debt application can be completed and submitted online.
The claim form must include your full name and address as the person filing the claim form (referred to as the 'Applicant') and those of the other party (referred to as the 'Respondent'). It should be lodged together with a copy of any relevant contract or other documents, such as receipts, that relate to the claim.
There is a small fee payable when you lodge your claim. As of December 2020, the filing fee for a minor claim against an individual debtor is $156.20 or $302.20 if the Defendant is not an individual (e.g. a company). Interest may also be claimed from the date the claim arose, and this should be noted on the claim form.
QCAT considers minor debt dispute applications in two ways: if your claim amount is less than $1,500, your matter will be listed for a hearing without the need for mediation; if your claim amount is greater than $1,500, your matter will be listed for mediation, and if it is not resolved, it will then be listed for a hearing. Mediation is a timely dispute resolution service in which a mediator assists the parties in discussing their differences and finding a mutually beneficial solution. The mediator acts as an independent third party and guides the participants through a structured mediation process. If the parties reach an agreement, the mediator records the terms of the agreement, and each party signs and receives a copy.
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Redirect debtor's earnings
If a friend owes you money, the first step is to communicate and negotiate directly with them. Politely remind them of the outstanding debt via email and phone, as it could be a simple oversight or miscommunication. If there is no response, follow up with a phone call to ask when they plan to make the payment. This will help you understand their situation. It is important to document any discussions during these calls or emails.
If initial communications and informal negotiations fail, the next step is to issue a letter of demand. This is a written request, usually prepared by a lawyer, demanding payment of the debt. It should include details such as the total amount owed, confirmation that goods or services were provided, a final payment date, and the potential consequences if payment is not made. Attach a copy of the relevant invoice and/or documentation to ensure the debtor has all the necessary information.
If a demand directly to the debtor is unsuccessful, mediation or other forms of dispute resolution are viable alternatives. Engaging a third-party mediator can facilitate a constructive dialogue and help both parties reach a resolution. There may be instances where debtors dispute the debt or claim they are unable to pay in full, making negotiation essential. In such cases, you might renegotiate the debt to a more realistic amount or agree to a structured payment plan. Regardless of the agreement reached, it is crucial to document everything in writing.
If all else fails, legal action may become necessary to recover a debt. This usually involves the filing of pleadings, disclosure, mediation, and, failing success at mediation, a trial. If you are successful at trial and the debtor still does not pay, you can commence enforcement proceedings. Depending on the court in which you commenced proceedings, the judgement may need to be registered.
Once the judgement or money order is registered, the enforcement creditor can apply for a warrant of redirection of earnings within six years from the judgement date. This warrant will be issued to the debtor's employer or another third party, requiring them to withhold a portion of the debtor's salary each week and redirect it to you until the debt is paid. However, the debtor must be left with a minimum balance to continue living, which is currently $504.60.
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$7.99
Prepare claim documents
To prepare claim documents to recover money owed by a friend in Australia, here are the steps you can take:
- Understand the time limits: In Australia, there is a time limit of six years to start a court case to recover a debt. This time limit starts from when the money became owed, when the last repayment was made, or when the debt was last acknowledged in writing.
- Gather evidence: Collect all the relevant documents that support your claim, such as bank statements, loan agreements, emails, or text messages. These documents should provide evidence of the debt, including the amount owed, the date and place it occurred, the terms of the agreement, and any records of repayment or acknowledgment of the debt.
- Prepare a letter of demand: Before initiating legal proceedings, it is recommended to send a letter of demand to your friend. This letter should clearly state the amount owed, why it is owed, and when it should have been repaid. It should also include a deadline for repayment and the consequences of non-payment, such as legal action. Sending this letter may help resolve the issue without the need for court involvement.
- Decide on the appropriate court: Depending on the amount of money owed and the state or territory you are in, you will need to determine the correct court to file your claim with. For smaller debts, you may be able to lodge a "minor debt claim" with your state or territory's Civil and Administrative Tribunal. For larger debts, the Magistrates Court or higher courts may be the appropriate jurisdiction.
- Complete the claim form: Obtain the necessary claim form from the relevant court or tribunal and carefully fill it out. Provide all the requested information accurately and attach any supporting documents. Ensure that you have the correct name, address, and legal entity of the other party, as this is essential for serving the claim documents effectively.
- Serve the claim documents: Once your claim documents are prepared, you will need to serve them on your friend, the defendant. This can be done through certified mail or by engaging the services of a court official. Proper service of the claim documents is crucial to ensuring that your case can proceed in court.
It is important to carefully review the specific laws and procedures in your state or territory, as they may vary. Seeking legal advice or consulting with a legal aid service can also help you navigate the process of preparing claim documents and recovering money owed by a friend in Australia.
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Seek legal advice
If you are considering legal action against your friend, it is important to first seek legal advice. The Law Society of the Australian Capital Territory can help you find a private lawyer or refer you to pro bono services.
Before you seek legal help, you should make an effort to encourage your friend to pay you back. Send them a letter that is firm but polite, outlining the amount owed, what it was for, and a deadline for repayment. If you are a business, consider whether you have a range of payment options available to make it easier for your customers to pay their bills.
If your friend still refuses to pay, you may need to start legal proceedings. It is important to act within six years from the date the debt arose, or your claim may be considered "statute barred", or out of time. You should ask your solicitor whether the cost of legal action is worthwhile, taking into account the amount of the debt, the likelihood of obtaining a judgment, the limited amount of costs recoverable, and the potential costs if you are unsuccessful. Your solicitor will advise you on the right court or tribunal to go to, and in most cases, no legal costs are awarded to either party.
If you do decide to proceed with legal action, you will need to gather all the papers and documentation you have that relate to the debt and take them to your solicitor.
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Frequently asked questions
The first step is to send them a demand letter for full payment within a specified timeframe, failing which you will sue them. This should be sent by registered mail to ensure they receive it.
The letter should include how much is owed and why, when the money should have been repaid, and what will happen if they don't pay you back. It is important to clearly tell the other party that you believe they owe you money, and how much.
If there is no response to your letter of demand, each state and territory in Australia has different rules about how to recover money owed to you. For example, in Queensland, you can lodge a "minor debt claim" with the Civil and Administrative Tribunal if the amount is less than $25,000. For larger debts, the Magistrates Court can hear disputes.
If the debtor is owed money by someone else, this can be ordered to be redirected to you. Similarly, the debtor's employer can be ordered to redirect most of their wage to you, leaving only enough for necessary living expenses.
