The first thing to do is to make your request ‘formal’. Then, if you do not hear anything, lodge a Statement of Claim with your local court. The final outcome will be determined by the court – whether the debtor shows up or not.
Where do you start? The first step is to send your debtor a formal Letter of Demand.
Here are five things to include in your Letter of Demand:
- Amount of the debt
- Date the debt was due
- Full description of the debt
- Evidence of the debt, such as contracts or agreements showing the cost for goods or services, invoices, any emails related to the agreement or evidencing the agreement, etc.
- And ensure you clearly date your Letter of Demand
Are there any limits of using a Letter of Demand?
There are amount limits and time restrictions when using a Letter of Demand to get paid. Amount limits vary by state and territory, so check the website of your local small claims court. There are also time restrictions, so make sure you are not out of time for making a claim.
What if I don’t hear anything back?
Normally you would send at least two Letters of Demand before starting any court action. Your debtor may be away or just testing to see if you will go further. If the debt has been outstanding for some time, two Letters of Demand should be sufficient before lodging any claim in court.
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How should I send my Letter of Demand?
You need to be able to evidence that you both sent the letter and that it was received. The court needs to see that you have communicated the debt, tried to get payment and the debtor has knowledge of this debt but is just not paying you.
What next? Use the courts to get paid
You must wait at least 21 days after you send the last Letter of Demand before lodging your claim in court. The court document that you file is called a Statement of Claim and in most states must be lodged in person. Filing fees vary depending on the state and the amount, but in general are under $100.
Then you have to wait and see if there is a response – usually 21-28 days, depending on your state or territory.
If there is no response, you will get a default judgment in your favour. If the debtor files a defence, you will have to go to court with all your evidence to present your case. But if the debtor does not show up to court, you will also get a default judgment in your favour.
If you win your case in court, you have a right to be paid. But if they still do not pay you, you can ask the court to begin enforcement proceedings. These will affect their credit rating and might involve garnishing their wages, selling their assets or, in some cases, jail time!
In any case, you will get your money.