How to Legally Collect Unpaid Debts in Australia: A Step-by-Step Guide

The first step in the debt recovery process is issuing a Letter of Demand. This formal document

informs the debtor that you expect payment and are prepared to pursue legal action if the debt

remains unpaid.

Your letter should include:



✅The amount owed

✅The reason for the debt (goods delivered, services rendered, loan, etc.)

✅The due date for payment

✅Supporting documentation, such as invoices or contracts

In many cases, a strongly worded letter of demand is enough to prompt the debtor to pay or to

enter into a payment arrangement. If there is no response within the time specified, you may

escalate the matter to court.

If the letter of demand does not result in payment, the next step is to file a legal claim.

Where to File:

In South Australia, your options depend on the size of the debt:



Up to $12,000: File a Minor Civil Claim in the Magistrates' Court.

​Between $12,000 and $100,000: File a General Civil Claim in the same court.

What You’ll Need:

✅Your claim must include:

✅The amount of money owed

✅The full name and address of the debtor (defendant)

✅A clear explanation of why the money is owed

✅Supporting evidence: contracts, receipts, emails, bank statements, etc.

Once your claim is filed, it must be served on the debtor. They then have the days prescribed to:



Pay the debt

File a defence

File a counterclaim

Do nothing (in which case you may apply for default judgment)

If the debtor disputes the claim or files a defence, the Court will schedule a Directions Hearing.

This is not a full trial but a preliminary hearing where:

 ✅The Court attempts to identify the key issues

 ✅The parties may be encouraged to negotiate or settle

 ✅A timetable is established for preparing the matter for trial, if necessary

Many debt matters settle at or before this stage. Courts typically encourage resolution without

proceeding to a full trial to save time and costs for everyone involved.

If the matter cannot be resolved at the Directions Hearing, it proceeds to trial.

At trial:

✅You (the creditor) will present your evidence and any witnesses

✅The debtor will present their defence and evidence

✅The Court will make a ruling based on the facts and law

​

If the Court rules in your favor, it will issue a judgment ordering the debtor to pay you the specified amount.

If the debtor fails to respond to your claim within the specified number of days, you can apply to the Court for a Default Judgment.

This means:



✅The debtor is deemed to have admitted the debt

✅You are granted judgment without the need for a hearing

Default judgment is often the quickest and most efficient way to recover a debt when the debtor is unresponsive.

Enforcement Options in Australia:

1. Investigation Hearing

The Court may require the debtor to attend an Investigation Hearing to examine their financial situation. The debtor must disclose:



✅Income and employment details

✅Assets and liabilities

✅Living expenses

This information helps determine the best method of enforcement.

2. Warrant of Sale

You may apply for a Warrant of Sale, which allows the Sheriff to seize and sell the debtor’s

property (e.g., vehicles, electronics, or even real estate) to recover the debt.

3. Charging Order

A Charging Order secures the debt against the debtor’s real property. If they sell or refinance

the property, you are entitled to be repaid from the proceeds.

​

4.Garnishee Order

A Garnishee Order redirects money owed to the debtor by third parties (such as their employer

or clients) directly to you. This is particularly effective if the debtor receives a regular wage or

has outstanding invoices from other businesses.

5. Bankruptcy Proceedings

If the debtor is an individual and owes more than $5,000, you may apply to have them declared bankrupt. Once bankrupt, a trustee will sell their assets and distribute the funds to creditors.

6. Company Liquidation

If the debtor is a company and owes more than $2,000 you can initiate winding-up proceedings to place the company into liquidation. A liquidator will then take control of the company’s assets and repay creditors.

Debt recovery can be a complex and emotional process. While this guide provides a detailed roadmap on

how to collect an unpaid debt, it is always advisable to seek legal advice tailored to your specific situation. At Global Legal Experts, we offer professional debt recovery services, including:



Drafting letters of demand

Representing clients in Magistrates’ Court

Managing enforcement proceedings

We understand the legal system and know how to navigate it to get results. We also offer a

consultation to discuss your case and provide initial guidance.

Recovering unpaid debts in Australia doesn’t have to be overwhelming. By following a structured, step-by-step legal process—beginning with a letter of demand and ending with enforcement—you greatly improve your chances of getting your money back.

Each case is different, and the right strategy may vary depending on the debtor’s financial situation, the size of the debt, and whether the debtor is an individual or a company. However, armed with the knowledge in this guide, you’re already ahead in understanding how to protect your financial interests and assert your legal rights.

Need help recovering a debt?

Contact Global Legal Experts today to discuss your options. We’re here to help you take the stress out of debt recovery and put you back in control.