Debt Recovery Lawyers

When a customer, client or business (the ‘debtor’) refuses to pay what you are owed (the ‘creditor’), every day that passes can make the recovery harder. The process of recovering funds can place significant pressure on individuals and businesses alike. When you are faced with an ongoing dispute regarding the collection of debt, it is beneficial to engage a debt recovery lawyer to establish an effective strategy that is commercially viable.

Citilawyers acts for businesses, sole traders and individuals recovering outstanding debts across Sydney. We assist in your debt recovery matters, from issuing a letter of demand through to commencing court proceedings and enforcing judgments. For broader litigation services beyond debt recovery, see our litigation lawyers Sydney page. For a full overview of our debt recovery services, including preventative credit protection and insolvency pathway, see our debt recovery page.

If you are currently experiencing a debt recovery issue, reach out to our team today on (02) 9233 7737 to book a consultation.

When Should You Contact a Debt Recovery Lawyer?

Contact Citilawyers for debt recovery matters as soon as one or more of the following applies:

• An invoice is more than 60 days overdue and follow-up requests have been ignored;
• A customer has disputed an invoice without genuine grounds;
• A debtor has disappeared, changed address, or refuses to communicate;
• A trade customer has shown signs of financial distress;
• You are owed money under a contract, supply agreement, or business sale;
• The debt is significant enough that informal demands have stopped working; or
• You suspect the debtor is moving assets or preparing to become insolvent.

For broader commercial advice on protecting future business cash flow and minimising bad debt exposure, see our cash flow and debt minimisation lawyers page.

The Debt Recovery Process

Citilawyers manages each stage of the debt recovery process. Generally, a letter of demand is sent to the debtor to pay the money owing. Failure to respond to the letter or denial of any amount outstanding to the creditor may escalate the matter to court.

The steps below outline in more detail the general process for debt recovery matters:

1. Letter of demandA letter of demand is a letter sent to the other party (the debtor) that asks them to pay the money owed. Generally, a letter will include the amount owed to the creditor and why the money must be paid. The letter serves as a warning to the other party that if the amount owing is not paid within the timeframe provided (usually 14 days) then legal proceedings will be commenced.

   For more guidance on protecting future receivables and how letters of demand interact with contractual debt recovery clauses, see our article on business credit terms strategy.

2. Commence legal proceedingsLegal proceedings are commenced by filing a Statement of Claim with the relevant court which sets out the pleadings and relief sought.

   The appropriate NSW court:

   • Local Court of NSW for debts up to $100,000 (Small Claims Division for debts up to $20,000).
   • District Court of NSW for debts from $100,001 to $1,250,000.
   • Supreme Court of New South Wales for debts above $750,000.

   Once a Statement of Claim has been filed and served on the debtor, the debtor has 28 days to file a defence. For an overview of how civil proceedings progress through the NSW courts, see our article on the civil litigation process.

3. Defended ProceedingsWhere the debtor files a defence, the matter proceeds to a hearing. We appear in defended debt recovery matters across the NSW courts and establish a strategy that assists your claim. For broader breach of contract claims that often accompany debt recovery, see our contract commercial disputes lawyers page.
4. Obtain judgementJudgement can be obtained when the debtor fails to respond to the Statement of Claim, the defendant’s defence holds “no real prospects” of success or the court makes an order at the conclusion of the trial.
   • Final judgement: where the court hands down a judgement at the end of the trial.
   • Default judgement: where the defendant has failed to reply/serve a defence within 28 days from when the Statement of Claim was served.
   • Summary judgement: where the plaintiff can apply to the court for judgment when the defendant has “no real prospects”.
5. Enforcement of judgementThe enforcement of judgement occurs after a decision has been made and allows the creditor to recover costs pursuant to the court order. The methods to enforce judgement are set out in Part 8 of the Civil Procedure Act (NSW) and Part 39 of the Uniform Civil Procedure Rules 2005 (NSW).

   The judgement creditor must request, in writing, an examination notice from the judgement debtor which requires that person to provide answers to relevant questions and produce documents. A judgement debtor has 28 days to comply with the examination notice once served.

   For a detailed explanation of each enforcement method, see our article on NSW judgment enforcement methods.

   Following the judgement debtor producing the relevant material, we will pursue the most appropriate enforcement methods given the circumstances, these include:

   1. Writ of execution: Sheriff takes possession of real property or personal property that is sold to cover the debt.
   2. Garnishee order: Enforcement made against debts, wages, salary, rent.
   3. Charging order: Entitles a charge to be placed on judgement debtors’ assets, such as shares, and prevents the debtor from selling or dealing with them. The creditor can take proceedings to benefit from the charge after 3 months.
   4. Statutory demand: a formal demand to a company under section 459E of the Corporations Act 2001 (Cth) to pay debt owed, which may result in the winding up of the company. For dedicated guidance on statutory demand drafting, service, response, and set-aside applications, see our statutory demand lawyers page.

Where statutory demands or insolvency proceedings are required, our insolvency and bankruptcy lawyers Sydney advise on the full winding up and bankruptcy pathway.

Who Pays Legal Costs in Debt Recovery?

In most successful debt recovery matters, the court will order the debtor to pay a contribution toward your legal costs in addition to the debt itself. This is known as a costs order, and it typically covers 60 to 70 per cent of your actual legal fees on a standard basis, not the full amount. If the debt is small and undisputed, recoverable costs may be added as a fixed amount under court scale fees rather than calculated individually. We factor likely cost recovery into our advice when assessing whether a matter is commercially worth pursuing.

Why choose Citilawyers?

Citilawyers are skilled in debt recovery matters across New South Wales. Our lawyers have extensive knowledge on the topic and are able to provide practical legal solutions.

Our approach to debt recovery is built on three principles:

• Act fast: We act quickly to recover your debt.
• Cost-effective recovery: Litigation is expensive. We assess every matter on a commercial basis, is the debt recoverable? Are the assets there? Is the debtor solvent? Where recovery is not commercially viable, we tell our clients honestly. Where it is, we pursue it efficiently.
• Strategic escalation: Some debtors pay on a letter of demand. Some require a statement of claim. Some require statutory demands. Some require enforcement action. We match the level of escalation to the debtor’s behaviour and capacity to pay.

If you are currently experiencing a debt recovery issue, reach out to speak with our team.

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