Are you a creditor that has attempted all routes to collect unpaid invoices to no avail and thinking about legal debt collection?
If so, it is likely that you are feeling incredibly irritated and stressed about the matter and don’t really know what to do.
You are not alone in this! Many creditors experience, at some point in their career, a client that simply will not pay their invoice no matter what you try.
This is why it is important to any business owner that uses invoices to have some tips and tricks for how you can use the law to finally collect them when clients just don’t want to pay.
In this article, our expert Australian debt collectors will discuss 3 legal options that you can use to finally collect unpaid invoices and how using said options can help to benefit your business.
What Can I Do Before Taking Legal Action?
Before proceeding to take legal action, it is in your best interest to ensure that you have exhausted all other routes first.
Legal action, in any form, can cost you a lot of money and be an incredibly time-consuming process.
It is wise to consider some of the following options first if you haven’t already of course.
Non Legal Debt Collection - Contact Your Debtor
The first step towards collecting a debt from a client is to get in contact with them! This tip may seem a little obvious.
Of course, you cannot collect an unpaid debt without contact.
Well, creditors can often skip this step as they assume that speaking with the client wouldn’t be particularly helpful if they aren’t paying their debt anyway. The reality is quite the contrary!
A client may forget about their debt or be in an alternative situation where a simple email or phone call may help them to pay you what they owe!
Non Legal - Send Overdue Reminders
Once you have tried to engage in some friendly contact with your debtor, it’s probably time to become a little harsher and tell them the reality of the situation.
You may wish to send them an overdue reminder informing them of your intention to take action if they continue to not pay their invoice.
Non Legal ADR - Negotiation
Negotiation should be the last resort before employing some legal strategies, but it can be beneficial all the same.
If your debtor finds themself in a situation in which they do not have the financial means to pay you as earlier agreed upon, negotiation is a great option that you can use!
Quasi Legal ADR Methods
Another non legal debt collection option that you may wish to engage in to try to recover your unpaid invoices from clients is ADR, or alternative dispute resolution, techniques.
The term ‘alternative dispute resolution’ refers to the range of options that someone involved in a dispute can use to prevent the need to go to court to resolve your matter.
This can be incredibly effective for a range of different types of matters and, depending on the details of your particular arrangement, has a wide variety of options to choose from, such as adjudication, mediation, and others, that can be of benefit in different ways.
For example, mediation occurs when an impartial third party, referred to as a mediator, oversees a meeting between the two parties to ensure all conversations remain productive and civil.
This method is both cost and time effective and does not legally bind parties (unless you take action for it to do so), so it can fit your matter if these are some features that you are looking for!
What Legal Debt Collection Options Do I Have?
Now that you’ve tried all other routes, it’s time for your business to consider all of the legal options that it has.
Although legal action can be expensive and drawn out, it is sometimes the best option for your particular situation and should be at least considered.
The following options are some different legal routes that you may wish to try.
Legal Debt Collection - Letter of Demand
The first legal option that you may wish to use to collect your unpaid invoice is a letter of demand.
A letter of demand is a legal document that warns the debtor for the final time before you begin with routes such as litigation.
This may be a wake-up call for your client to pay their invoice finally or pay the consequences of non-compliance.
This can be incredibly effective as not only does it provide an incentive for debtors to pay their invoices but is generally much more cost-efficient and saves a lot of time!
You may wish to have a letter of command created by a lawyer to ensure it is legally sound and effective in reaching your debtor as it should.
Issue a Claim and Statement of Claim in Court
A claim is a legal document in Queensland that sets out the basis of a creditor's legal debt claim or dispute against another party.
It is a written document that summarises the facts and legal arguments in support of the individual's case.
The claim may ask the court for a particular remedy, such as compensation or an injunction, or it may ask for a declaration that the person's rights have been infringed.
Claims can be brought in various legal actions, such as court proceedings, administrative hearings (QCAT, NCAT, VCAT, for example).
The statement of claim must include a brief summary of the material facts on which the plaintiff relies, as well as the legal foundation for the claim.
It should also specify the plaintiff's requested remedies, which might include monetary damages, specific performance, or an injunction.
The statement of claim must be served on the defendant, who must subsequently reply within a certain time frame.
The answer is frequently in the form of a defence, which states the defendant's stance on the points addressed in the statement of claim.
Legal Debt Collection - Statutory Demand
A statutory demand is another route that you can engage in if you wish to try a legal option to get a debtor to pay their unpaid invoices. A statutory demand is a creature of the Corporations Act 2001, which states:
“Statutory demand means:
a document that is, or purports to be, a demand served under section 459E;
such a document as varied by an order under subsection 459H (4).”
A statutory demand is a formal request for your client to pay the debt/unpaid invoice discussed within the document.
This prevents businesses that are insolvent from continuing to trade or engage in the initiation of new debts or other financial matters.
Once an individual or business is served with a statutory demand, they will be allowed 21 days to pay the debt or to take action regarding having the statutory demand set aside.
If they do not do either of these things, they will face penalties.
Consider Debt Collection
Have you tried all of the routes of collecting an unpaid invoice from your client, both legal and not, with no sign of success?
Or are you simply looking for an easier way to collect these unpaid debts? If so, it may be time for you to consider debt collection.
Debt collectors are professionals in the industry of debt recovery and can, therefore, collect your unpaid invoices with much more skill and success.
They can also use tactics such as skip tracing to locate your missing debtors and collect invoices from seemingly unreachable clients.
Try using a debt collection agency today; you will see a difference!
Advance debt collection is an Australia-wide commercial debt collection agency and credit and accounts receivable management. We can recovery your debts, conduct skip tracing, and manage your accounts receivable. We collect your debts for commission only. This means no collection, no commission. We are professional debt collectors with combined 20 years of experience to help you collect your debts. We are partnered with expert litigation lawyers with years of experience in debt recovery, enforcement, and insolvency. Under the Agents Financial Administration Act 2014 Advance Debt Collection Pty Ltd hold authority number 4583821 to act as a debt collector. ADC Advance Debt Collection® is a registered trademark.