Debt Recovery
In running a business, unpaid amounts arise in many ways: a customer who simply never pays, a counterparty who keeps promising but never follows through, or a debtor company that suddenly ceases trading. Each of these directly affects your cash flow, your supply-chain relationships and the decisions you make about how to keep operating. Some debts can be resolved early through a formal demand and negotiation, but the longer a debt is left, the weaker the evidence may become, the more likely the other side is to move assets, and the higher the cost of recovery.
NS Legal acts for individuals, companies and small and medium-sized businesses across the full range of debt recovery matters, including unpaid invoices, service fees, payment for goods, contract debts, loans, lease arrears, debts arising from commercial dealings, and enforcement after judgment. We help you choose the right approach to recovery based on the size of the debt, the strength of your evidence, the identity of the other party, their ability to pay, and the extent of any dispute.
The key to debt recovery is working out which approach is most likely to recover the money at a reasonable cost. For clear, undisputed debts, a formal Letter of Demand or a repayment arrangement may be enough; for larger debts where the debtor company is still trading but refusing to pay, it may be necessary to consider court proceedings or a Statutory Demand.
Debts We Can Help You Recover
NS Legal can assist with many different types of debt recovery, including commercial debts, personal loans, company debts, amounts payable under a contract, unpaid invoices, service fees, payment for goods, lease arrears, final payments on building or project work, and enforcement where a debtor has still not paid after judgment.
Common situations include:
- The other party keeps delaying payment after receiving the invoice — saying they will pay “next week” or “by the end of the month” — but never actually pays;
- The services or goods have already been provided, and the other party suddenly refuses to pay, citing quality, scope or price;
- After a loan falls due, the other party admits only part of the amount, or begins to deny ever having borrowed;
- A corporate customer stops responding, moves out of its premises, or appears to have ceased trading;
- You have already obtained a court judgment, but the other party still has not paid voluntarily;
- The debt is substantial, but you are unsure whether it is worth suing, or worried that the legal costs will exceed the amount recovered.
What to Assess Before You Pursue a Debt
Is the Debt Actually Due?
Not every unpaid amount can be pursued straight away. The first step is to confirm whether the obligation to pay has actually arisen — for example, whether the payment date set out in the contract has passed, whether the invoice has fallen due, whether the goods or services have been delivered, whether a project milestone has been completed, or whether the repayment date for a loan has arrived.
If the contract does not clearly set out when payment is due, that does not mean the debt cannot be recovered — but it does mean the other party’s obligation to pay must be assessed by reference to the course of dealing between the parties, their communications, the invoice terms, and how the contract was actually performed.
Is the Right Party Being Pursued?
A very common issue in debt recovery is that the client knows “who I have been dealing with” but is not necessarily clear, in legal terms, on “who actually owes the money”. The other side may trade under a business name, while the true legal entity could be a company, an individual, a partnership or a trust. Naming the wrong party at the outset in a Letter of Demand or court documents can later cause problems with service, judgment and enforcement.
Before taking formal action, it is necessary to confirm the other party’s exact legal name, ABN, company number (ACN), director details, registered address, and whether they are still trading.
Is There a Genuine Dispute?
If the debt is clear, the amount is certain, and the other party is simply delaying payment, the recovery strategy can be more direct. But if the other party raises issues of service quality, contract scope, a change in price, defects in delivery, or a counterclaim, it is necessary first to assess whether there is any factual basis for those arguments.
Not sure which approach is most likely to recover the money at a reasonable cost?
The Main Approaches to Debt Recovery
Letter of Demand
A Letter of Demand is particularly suited to the following situations: the other party keeps delaying but has not formally denied the debt; the amount is clear; the client wants to give the other side a final opportunity before suing; or a formal document is needed to move the other party into negotiations.
The purpose of a Letter of Demand is to put the matter on a formal footing: it sets out clearly who owes the money, how much is owed, why it is due, when payment is required, and what legal action the creditor will consider if payment is not made. Where there is still a commercial relationship, a Letter of Demand can also leave room for negotiation — for example, requiring payment within a set period, or proposing a reasonable instalment arrangement.
Where repeated reminders by WeChat, text message or email have produced no result, a Letter of Demand can escalate ordinary chasing into formal legal notice, and it also creates a clear record for any later decision about whether to sue. A demand will usually set a definite deadline for payment based on the nature and size of the debt — for example, 7 or 14 days — rather than vaguely asking the other party to “deal with it as soon as possible”.Instalment and Settlement Arrangements
If the other party admits the debt but cannot pay it all at once, it may be worth entering into an instalment agreement or a settlement deed. Documents of this kind need to set out clearly the total amount owed, the amount of each instalment, the payment dates, the payment method, the consequences of default, and whether the creditor can move directly to further legal action if the other party defaults again.
Many recovery matters become stuck at exactly this point: the other party is willing to “pay it off slowly” but there is no formal agreement; the creditor waits a few more months, and then the other party disappears again. In that situation the creditor may have a chat history, but enforcement is still difficult. For this reason, whenever the amount is substantial or the repayment period is long, you should not rely solely on a verbal promise or a casual WeChat reply.Statutory Demand
Where the debtor is a company, and the debt is due, the amount is certain, and there is no genuine dispute, the creditor may consider issuing a Statutory Demand. A Statutory Demand is a formal legal process directed at a company, requiring it within the prescribed period to pay, provide security, reach an arrangement, or apply to the court to set the demand aside.
This approach carries significant pressure, because if the company fails to deal with the demand properly within the period, it may give rise to a presumption of insolvency and, in turn, lead to winding-up proceedings. But precisely because the consequences are serious, a Statutory Demand must not be used lightly. If the debt is genuinely in dispute, or the amount, contractual basis or performance is unclear, the debtor company may apply to set the demand aside and seek to have the creditor pay the associated costs.
For this reason, whether a Statutory Demand is appropriate requires careful assessment beforehand of whether the debt is clear, whether it exceeds the statutory minimum amount, whether there is any arguable defence, and whether the company still has any real capacity to pay.Court Proceedings
If a Letter of Demand has no effect — the other party refuses to pay, becomes uncontactable, or raises a defence with no real substance — it may be appropriate to commence court proceedings. Litigation is not the first option in every debt matter, but where the other party engages in prolonged delay, refuses to communicate or deliberately creates obstacles, court proceedings are often the necessary step to push the matter through to a result.
Enforcement of Judgment
Obtaining a court judgment does not mean the money will automatically arrive. If the other party still does not pay after judgment, the creditor needs to consider enforcement. Enforcement options may include examining the debtor, identifying assets and income, applying to seize property, garnishee orders against wages or bank accounts, or, in appropriate cases, taking further winding-up steps against a company.
Whether it is worth continuing to enforce depends on the size of the debt, the state of the other party’s assets, whether the company is still trading, whether there is any traceable income, and the cost of enforcement. In some matters, the real difficulty is not in obtaining judgment, but in actually recovering the money once judgment has been given.
If the Other Party Denies the Debt
In debt recovery, many debtors only begin to raise a dispute once they have been formally pursued for payment. Common assertions include that the services were not done properly, that the goods were defective, that the price was never finally agreed, that no contract was ever formed, that the conditions for payment have not yet been triggered, or that the parties had verbally agreed to waive part of the amount.
In that situation, the first step is to check whether what the other party now says is consistent with the earlier evidence. If they previously confirmed receipt of the goods, used the work delivered, asked for more time to pay, or admitted the amount owed, and only later suddenly denied the debt, those records can be important material for rebutting their defence. But if the other party did in fact raise quality issues promptly after delivery, or the scope of the contract was itself unclear, the matter may need to be handled as a commercial contract dispute.
The Problems Caused by Leaving a Debt Too Long
The earlier a debt is dealt with, the easier it usually is to keep costs under control. Leaving it too long can create several practical problems: the debtor company may have ceased trading, assets may have been moved, key staff may have left, communication records may have been lost, witnesses’ memories may have faded, and the matter may even be approaching or past the limitation period for suing.
Ordinary contract debts are subject to a limitation period. The precise time limit depends on the nature of the debt, when it fell due, the date of the last payment, whether the other party has ever acknowledged the debt in writing, and whether there are any other factors that extend or interrupt the limitation period. If a debt has already been left for several years, you should not rely on the other party’s verbal promises — instead, you should confirm as soon as possible whether you can still sue, and whether immediate action is needed to protect your opportunity to recover.
How to Reduce the Risk of Future Bad Debt
Debt recovery is not only about dealing with debts that have already arisen — it also includes helping businesses reduce future bad debt. The root cause of many commercial debts is not that the other party is wholly untrustworthy, but that the documentation at the outset of the dealing was too loose: no written contract, unclear payment terms, no evidence of delivery kept, no clearly stated interest on overdue amounts or recovery costs, or a failure to suspend services promptly when a customer keeps falling behind.
A business can reduce the difficulty of later recovery through clearer credit terms, customer onboarding checks, written quotes and sign-off processes, regular reconciliation, an overdue-reminder system, and appropriate security arrangements. For businesses that frequently extend credit, supply over the long term, or work on a project basis, putting clear collection mechanisms in place in advance is often more effective than chasing the debt after the event.
How NS Legal Can Help
NS Legal helps clients develop a recovery strategy suited to the size of the debt, the available evidence, the identity of the other party and the commercial background. We do not push every matter towards litigation — we first assess which approach is most likely to resolve the problem at a reasonable cost.
We can help clients to:
- Review contracts, invoices, payment records, communications and other evidence of the debt;
- Confirm the debtor’s identity, company status, director details and likely capacity to pay;
- Draft and send a Letter of Demand;
- Negotiate with the debtor over payment, instalments or a settlement;
- Draft repayment agreements, settlement deeds or payment undertakings;
- Assess whether a Statutory Demand is appropriate;
- Prepare and conduct court debt recovery proceedings;
- Assess and take enforcement steps once judgment has been obtained;
- Advise businesses on improving payment terms, credit management and bad-debt prevention.
Not sure how to recover what you are owed, or whether it is worth suing?
Frequently Asked Questions
The other party keeps saying they will pay — do I still need to send a Letter of Demand?
If the other party is only occasionally a few days late, you may not need to send a Letter of Demand straight away. But if they have promised to pay repeatedly without following through, continuing to wait can weaken your negotiating position and may lead them to believe the payment deadline can be put off indefinitely. A Letter of Demand moves the matter from ordinary chasing to a final notice before formal legal proceedings, making it clear to the other party that if they do not pay, the next step may be litigation, a Statutory Demand or other recovery action.
I only have an invoice and no formal contract — can I still recover the debt?
Yes, but it depends on whether there is other evidence establishing the trading relationship and the obligation to pay. The invoice itself is important, but it usually needs to be supported by quotes, emails, text messages, WeChat records, proof of delivery, confirmation of receipt, payment records, or any acknowledgement of the debt by the other party. If the other party has already made a part-payment, or previously asked for more time to pay, those records may also help to prove that the debt exists.
The other party is unhappy with how the work was performed and is refusing to pay — what can I do?
The first step is to assess whether the other party’s dissatisfaction amounts to a genuine dispute. If the agreed obligations have been completed, and the other party previously accepted the work, used the results or acknowledged the obligation to pay, then being unhappy afterwards does not release them from liability to pay. But if the scope of the contract was unclear, there is a genuine dispute about what was delivered, or the other party raised quality issues promptly, the evidence needs to be prepared as for a contract dispute, rather than treated simply as an unpaid debt.
Is a Statutory Demand faster than suing?
In the right matter, a Statutory Demand can place significant pressure on a corporate debtor, but it is not an ordinary chasing tool and cannot be used for a debt that is genuinely in dispute. If the amount, the due date or the contractual basis of the debt is in dispute, the other party may apply to set the demand aside and seek to have the creditor pay the costs. For this reason, whether to use a Statutory Demand depends first on whether the debt is clear, whether it is due, whether there is no real dispute, and whether the other party is a company.
I won the case — what happens if the other party still doesn’t pay?
After obtaining judgment, if the other party still does not pay, you can consider enforcement — for example, requiring the other party to disclose their financial position, identifying assets, applying to seize property, or taking other enforcement measures permitted by the court. Whether it is worth continuing to enforce depends on whether the other party has income or assets, or is still trading. For a debtor with no assets, that has ceased trading, or that is heading towards winding up, you need to assess realistically — even with a judgment in hand — how likely it is that the money can be recovered.
The amount owed is small — won’t engaging a lawyer cost more than it’s worth?
It depends on the amount, how clear the evidence is, the other party’s attitude, and the likelihood of recovery. Where the amount is small but the evidence is clear, a single Letter of Demand or a simple process can sometimes resolve it; where the amount is modest but the dispute is complex, continuing to pursue it may not make commercial sense. The safer course is to start with an initial assessment of whether it is worth sending a demand, negotiating or suing — or whether the focus should be on cutting losses and preventing future bad debt.
The debt has been outstanding for several years — can it still be recovered?
The key dates need to be checked as soon as possible — including when the debt fell due, the date of the last payment, the date of the last written acknowledgement of the debt, and the nature of the debt. Many contract debts are subject to a limitation period, and you cannot wait indefinitely simply because the other party keeps saying verbally that they will pay. If a debt has been outstanding for some time, you should obtain legal advice early to confirm whether you can still sue, and whether immediate action is needed.
Need to Recover a Debt? Contact NS Legal
Based on the size of the debt, the evidence and the other party’s circumstances, we choose the most practical approach to recovery for you and pursue it at a reasonable cost.
