Understanding Debt Collections In Australia

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Please enjoy this article on the debt recovery industry in Australia. We hope it saves you money down the road.

Interest Rates:

In Australia you cannot collect interest on a debt unless such an interest rate was specifically agreed to at the time the debtor entered into a contract with our client. Furthermore, Australian debtors are not accustomed to paying such interest and it is often used more as a negotiation tool than as a fee levied upon the debtor. If the amicable phase fails and a lawsuit is filed, however, an International Collection Agency reserve's the right to attach interest costs to the claim amount.

Debt Collection Costs:

Unless the creditor's terms specifically permit for the charging of debt collection costs to the debtor, they will have to be covered by the creditor. As with interest, any debt that proceeds to the legal phase can have these costs attached to the claim amount. The debtor will then be responsible for those costs, as well as any court fees incurred by the creditor.

Statute Of Limitations:

Simple contract debts in Australia are subject to a statute of limitations lasting six years from the first due date of the debt. This time period starts over if the debtor acknowledges the debt in writing or makes apayment toward the balance. Court judgments have a statute of limitations that lasts 12 years, making collection after that period of time impossible.

Accepted and most common payment methods:

Debts are typically satisfied via cheque payment or bank transfer. Direct debit payments are not offered.

Types of companies:

Sole Trader: The sole trader is also the business' owner, and they conduct business on their own. Unlimited liability includes personal assets and any assets that the trader shares with another individual.

Partnership: This association of people or entities operates a business that can be normal, limited, or incorporated. Some partners may enjoy limited liability, while the rest will be fully liable of debts and other obligations. Partners can be held for debts incurred by fellow partners in the organization.

Trust: In this business, a trustee maintains property or income that is produced for the benefit of the organization's trustees. Structures can be complex, as can the legal and financial obligations associated with trusts.

Proprietary Limited Company: This business exists separately from tis shareholders and is regulated by the Corporations Law. Extensive obligations are outlined for the company's directors; the company has limited liability, although the directors of the company can be held personally liable of they have engaged in fraudulent, reckless, or negligent conduct.

Retention of Title:

The Personal Property Security Act of 2009, suppliers can register their interest on the country's PPS Register in order to protect their own interests. This same register gives them a right to repossess the goods if their customer refuses to pay or satisfy any debts.

Suppliers register only once for each customer they serve.While the PPS Register is important, failure to register with the service does not necessarily render a Retention of Title agreement invalid. It does mean, though, that any ROT actions will be of a lesser priority than those registered with the government's own database.

Because of this, suppliers should take seriously their obligation to register with the database.

Failure to do so can lead to legal headaches and -- in some cases -- the inability to recover goods already delivered to a customer who cannot, or will not, pay for them. It also means they will bear significant legal expenses in defense of their own goods and agreements.

Legal System:

The local courts of Australia handle debts not exceeding $40,000 AUD. The district courts of Australia handle debts between $40,000 and $750,000. The Supreme Court handles debts in excess of $750,000.

Required documents:

- Account statements indicating timely or late payments - Credit notes paid against any invoices still outstanding - Contractual agreement between the creditor and debtor - Terms and Conditions agreement between the creditor and debtor - Order requests, deliveries, and confirmations, if needed

Legal dunning procedure:

It is unnecessary to send any notice of demand, a reminder to pay, or other correspondence, before pursuing a lawsuit against the debtor, unless stated otherwise in the original agreement. It is considered good form, however, to send a pre-legal notice to the debtor and give them a final chance to satisfy the debt.

Lawsuit:

A lawsuit begins when the creditor files a Statement of Claim. This outlines the debt and informs the debtor that, should they not pay immediately, legal action will commence.

The debtor has 28 days after receiving the Statement of Claim to defend the issue at hand. If this does not happen, and if the debtor does not satisfy the debt, a judgment will be entered against them by the relevant court.

The creditor can begin the lawsuit in any level of Australia's court system, but risks commencing the matter in an inappropriate court if they escalate too quickly. In this case, the lawsuit will be sent to a lower court.

If the debtor does not reply to any communication regarding the lawsuit within 28 days of receiving notice, creditors are entitled to a default judgment lodged against the debtor by the court. This is done by requesting and submitting and Application of Default Judgment. This application must include an affidavit in support of the filing by an officer of our client. It must carefully consider the debtor's entire financialsituation before being filed.

After it has been submitted and approved, a judgment can be enforced for up to 12 years.

Appeal:

Appeals from the local court system in Australia go directly to the country's Supreme Court. This adds a significant cost to the proceedings. Even so, if an appeal is necessary, it must be filed within 28 days of the court's initial decision unless stated otherwise by the judge.

In addition to an appeal, the debtor can also request to overrule a default judgment. This is based on proving two key pieces of information: - A reasonable explanation of why no response was filed to the original notice - A valid defense making the original claim invalid

Both of these key things must be proven. Satisfying only one requirement will not be grounds for removing or modifying a default judgment against the debtor.

Costs:

Legal costs in Australia are based on the cost of each state's laws and regulations, and they do differ between Australia's states. These costs, despite their variable nature, are based on the principal of the debt.

A summons in Australia typically costs between $200 and 1400 AUD; filing fees range from $300 to $1,000 AUD; and a default judgment application costs between $200 and $600 AUD.

After the proceedings, enforcement can cost up to $1,000 AUD.

In the event of bankruptcy, legal costs may escalate as high as $5,000 AUD.

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