Someone owes me money, what should I do?

If someone owes you money, you are the creditor and they are the debtor. Some options to get your money back from the debtor include are set out below. Some of the below information is based on the NSW Legal Aid website and we recommend you look at the resources provided on their website for more guidance (here). Alternatively, please contact us to discuss with one of our lawyers.

·         Try to resolve the dispute directly - Contacting the debtor and trying to reach an agreement about repayment is a good first step. Going to court is very stressful, costs a lot of time and money, and there is no certainty around how the court will decide the matter. If are able to resolve the matter with the debtor, you avoid this concerns. Some things to consider when negotiating with the debtor are:

o   Negotiation - Think about how you would like to settle the dispute and what the other party might accept. A good question to ask yourself is, “What is the amount I could receive from the debtor to make this dispute go away, and which I would be happy with?” If the debtor offers something less, a good question to ask yourself is, “Is this amount acceptable to me in order to end the dispute?”

o   Mediation - At mediation, you and the other party, with the help of a neutral person called a 'mediator', try to settle the dispute.  Community Justice Centres (CJCs) provide free mediation services in NSW (here). 

o   Agreement in writing – if you reach an agreement, it is important to put it in writing. There is no set form to a settlement agreement, however it is important that is sets out clearly what the parties have agreed. This can include:

§  ​​the amount of money to be repaid​

§  how the money will be paid, for example by cheque, cash or electronic funds transfer

§  the payment of interest on the debt

§  payment by instalments and the dates the instalments are due

§  what will happen if the amount or the instalments are not paid by the agreed date

A sample terms of settlement can be found on the NSW Legal Aid website (here)

·         Send a “letter of demand” – This is a letter which demands that the debtor pay you amount they owe. It is important to send this to the correct contact details (e.g. name of person or entity who owes you the money and their current address (physical or email)). If you do not have the correct contact details, you won’t be able to clearly communicate your claim to them. If you end up going to court, you won’t be able to give the court documents to them and this will cost time, money and stress later on. A letter of demand should include relevant information about the parties (names and current contact details) and the dispute (how much is owed, when is should have been paid by, how the money should be paid and by which date). Some sample letters of demand can be found on the NSW Legal Aid website (here).

Please include the following information in your letter of demand:

1. Your full name and contact details

2. The Defendant’s full name and contact details available to you

3. Details of the allegation(s), including:

   1. Dates

   2. Information about what happened

   3. Particulars (for example, where the allegation took place, details of any witnesses)

   4. What evidence you have to support your allegation

   5. Details of the financial injury, including any supporting documents to prove the financial injury (for example, invoices/receipts)

4. How much the defendant owes you

5. Information about how the defendant can pay you

6. A due date for the debt

·         Go to court - Going to court to have the debt enforced. This should be your last resort and you should get legal advice before taking this step. Which court you go to will depend on how much money you are owed. The Legal Aid NSW website provides useful information on which court you should go to and what you need to do (here).

In NSW, there are two divisions of the Local Court that you can apply to:

1. the small claims division (for claims of $20,000 or less); or

2. the general division (for claims up to $100,000).

Any claim for more than $100,000 will go to a higher court, such as the District Court or the Supreme Court.

A birds-eye view of filing in the Local Court - Small Claims Division is as follows:

1. File a Statement of Claim and Affidavit in Support.

2. Serve the court documents on the defendant.

3. If the defendant does not respond: you can seek a ‘default judgement’ against the defendant, which can be enforced if the defendant does not comply with the order to pay.

4. If the defendant responds: they will need to file a Response document, and you will then have the option to engage in negotiations with the defendant, or set the case for final hearing.

5. If the case goes to final hearing, then the Judge will read the evidence from both sides and make a decision, on the ‘balance of probabilities’ test, as to:

   1. whether the debt is valid;

   2. whether the defendant owes you the debt; and

   3. how much the defendant should pay you.

This process can be overwhelming, and we encourage you to seek legal support to at least draft the court documents. Your case will strongly rely on your court documents, and it is important that they include all the information you need in a format that is easy for the court to accept and understand.

In some cases, some or all of your legal fees can be paid for by the defendant if you are successful in court.

BEGG LEGAL has a lot of experience with debt recovery and Statements of Claim, and we would be happy to help you get the money that is owed to you.