23 Jul What Can You Do Legally If Someone Owes You Money?
When someone owes you money and refuses to pay, it’s easy to feel stuck, but you’re far from powerless. Australian law offers clear, practical steps to help you recover what you’re owed.
From open conversations to formal letters of demand, small claims court, and even bankruptcy proceedings for larger debts, there are multiple options available. The key is knowing when and how to use them.
The process often starts with a simple chat and many disputes are resolved at this early stage. But if that doesn’t work, tools like payment plans, legal notices, and court action can help you take back control and move things forward.
Start with Direct Communication
The quickest way to get back money someone owes you is through direct communication. This approach works best and won’t get pricey like other options.
Send a polite but firm payment reminder
A polite but firm payment reminder can stop debts from getting out of hand. Quick action helps promote goodwill and leads to better outcomes for everyone. Your reminder should:
- Stay direct yet gentle. Explain why you’re reaching out without pointing fingers.
- List all debt details like amount, invoice number and due date.
- Show them how to pay by sharing payment methods and account details.
- Let them know about late fees or what happens if they miss the new deadline.
A simple message like “I wanted to remind you about the $X I lent you. I’m budgeting for upcoming expenses, and getting that money back would really help” often does the trick.
Offer flexible payment options if possible
The debtor might admit they owe money but struggle to pay it all now. Offering flexible options improves your chances of getting repaid. You could suggest:
- Payment plans that match their current financial situation
- Delayed payment schedules or partial payments to make it easier
- Discounted lump-sum settlements in some cases
Showing flexibility builds trust and understanding. This strengthens your relationship with the debtor and makes them more likely to pay you back.
Document all communication attempts
Good record-keeping is crucial throughout this process. Make sure you track:
- Every interaction with dates, times and what was discussed
- Written proof of any payment arrangements you both agreed to
- Payment records showing dates, amounts and payment methods
- All letters, emails and text messages between you
These records are a great way to get proof if you need to take more serious action later.
Use Formal Notices and Mediation
Your next steps should be formal notices and mediation if talking directly doesn’t solve your debt problem. These methods help you stay firm while keeping good relationships intact.
What is a letter of demand?
A letter of demand works as a formal written request that shows how much someone owes you, why they owe it, and when they need to pay. This document warns about possible legal action if the person doesn’t pay by a specific date. Adding “Letter of Demand” at the top shows the debtor you mean business about getting your money back.
How to write and send a letter of demand
Your letter of demand should:
- List exact details about the debt amount, where it came from, and payment deadlines
- Come with copies that back up your claim (contracts, invoices, past reminders)
- Stay professional but firm
- Be signed, dated with a copy saved
- Go through registered post with ‘signed proof of delivery’
Make sure you send it to the right legal entity that owes the money, not just the person you dealt with originally.
When to consider mediation before court
Mediation makes sense when:
- Someone disputes what they owe
- They say they can’t pay everything
- You want to keep doing business together
- Going to court might get pricey or take too long
A neutral third party helps both sides talk things through, which often leads to solutions everyone can live with, such as new payment plans.
Free and low-cost mediation services in Australia
Australia offers several budget-friendly ways to mediate. The Dispute Settlement Centre of Victoria provides free mediation and can usually set up meetings within two weeks. The NSW Small Business Commissioner also helps businesses settle their disputes through mediation. These sessions usually take two to three hours and beat going to court. They’re more relaxed and focus on finding practical solutions for the future.
Take Legal Action If Necessary
Legal action becomes a viable option if direct negotiation and mediation don’t work. You need to learn about the court process for debt recovery in Australia to protect your financial interests.
Filing a claim in small claims court
Small claims divisions in many Australian states handle straightforward debt recovery cases through simpler procedures. You must complete a Statement of Claim form with debt details and file it with the right court. The document needs the correct name and current address of the person or business you’re claiming against. You might have to pay their legal costs if the information is wrong.
How to enforce a court order
The debtor might still refuse to pay after you get a judgement. Here are your enforcement options:
- Garnishee orders that tell banks or employers to deduct money from accounts or wages
- Examination orders to get information about the debtor’s finances
- Writs for seizure and sale of property that direct the sheriff to take and sell assets
- Time limits for legal action in Australia
Creditors must start proceedings within six years from the debt’s due date, last payment, or written acknowledgment. Judgement debts stay enforceable for 12 years in most states. Victoria and South Australia allow 15 years.
Can you take someone to court who owes you money?
You can take legal action if you have supporting evidence. Here’s what you need to think about:
- Your connection to the filing state (the loan location or either party’s residence)
- Strong documentation including contracts, receipts, and witness statements
- The reality that recovery depends on the debtor’s assets or income, even with a favourable judgement
The time and money you’ll spend on court proceedings should be carefully weighed against your chances of successful recovery.
Consider Professional Help and Prevention
Professional debt collection becomes a good option after you’ve tried direct approaches and formal procedures. Let’s explore how to use these services well and stop future payment problems.
When to use a debt collection agency
Professional debt collectors can help in several situations. You might want their help with larger debts or long-overdue payments that remain unpaid despite several reminders. Professional debt collection agencies are a great way to get assistance when debtors become uncooperative, unresponsive, or hard to reach. Your business operations deserve full attention, so outsourcing makes sense if your internal recovery efforts haven’t worked or you can’t spare time chasing payments.
How debt recovery agencies operate
Debt collection agencies usually work on commission and charge between 5% and 30% of the recovered amount. These professionals first send payment request letters on their letterhead, then make phone calls if needed. They might work out payment plans or settlements on your behalf for tough cases. You can sell the debt outright to an agency for a small percentage of the total amount in some cases. Many agencies now provide online debt recovery services, you just need to input debtor information and they create payment request letters for a fixed fee.
Understanding debt collection laws in Australia
Australian debt collection follows strict ACCC and ASIC regulations. Collectors must follow specific rules about contact frequency (maximum 3 phone calls per week or 10 per month) and timing (weekdays 7:30am-9pm, weekends 9am-9pm). Laws ban harassment, intimidation, misleading conduct, and unconscionable behaviour. Collectors must respect privacy rules and keep messages confidential.
Tips to avoid future debt disputes
Smart prevention starts with complete credit checks on potential clients, clear payment terms, and automated reminder systems for overdue invoices. Written contracts protect both parties legally and ensure everyone understands their obligations. Early payment discounts or instalment options often encourage quick settlements.
What to do if someone owes you money and is avoiding you
Document all communication attempts if you face avoidance tactics. Stay professional but persistent by sending formal letters that outline the debt amount, payment terms, and what it all means. Try offering reasonable payment alternatives before taking next steps. A professional debt collector might work better if the debtor keeps avoiding contact. These experts excel at finding hard-to-reach debtors through techniques like skip tracing.
Take Control of Your Debt Recovery with Dynamic Commercial Collections
Chasing unpaid debts can be stressful, but you don’t have to do it alone. At Dynamic Commercial Collections, we follow Australia’s proven step-by-step approach, starting with direct contact and moving through letters of demand, mediation, and legal enforcement if needed.
Whether you’re looking to recover a single overdue invoice or manage ongoing collections, our team knows how to get results while protecting your time, cash flow and reputation.
Don’t let unpaid debts drag on. Contact Dynamic Commercial Collections today and take the next step toward getting what you’re owed.
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