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What Do You Need to Know About Your Legal Rights to Recover Debts in Australia?

Updated: Jul 21, 2021

Photo Courtesy: Melissa Walker Horn collected from Unsplash

Debt is often a very real issue in our lives these days. When you owe money to another person or organisation through a contract, whether written or spoken, it’s called a Debt. A person or organisation in debt is known as a ‘debtor’. Similarly, a person or organisation that is owed money is called a ‘creditor’.

Debt recovery is the process of recovering any amount of money from the debtor which the debtor is legally required to pay back to the creditor. Both debtors and creditors have their legal rights connected to the debt. There could be reasons why a debtor does not have to pay a creditor in full. Laws relating to Debt recovery in Victoria, as well as other states and territories of Australia, permits you to recover such money using various methods. In this article, we will discuss the options available to you when it comes to recovering a debt owed to you.

1. Letter of Demand-

As a creditor, if you want to recover a debt in Victoria, the first thing you should do is sending a letter of demand to the debtor. This is a letter outlining the details of the debt and asking the debtor to pay the money back within a certain time frame. You should mention in the letter of demand that if the debtor fails to pay the debt within the specified period, you will take the matter further to a court or tribunal.

However, harassing or intimidating the debtor, while asking for repayment, is unlawful conduct. Therefore, while writing a letter of demand to the debtor, you should be careful about the language and content of your letter. If you do not receive a response to your letter of demand, or if the debtor refuses to pay the money within the indicated time, you should take steps to recover the debt through the Victorian Courts and/or tribunals. The court or tribunal, that you need to commence the debt recovery proceedings in, will depend on the amount of the debt owing to you.

2. Victorian Civil & Administrative Tribunal (VCAT)-

If you are trying to recover a debt as a result of a ‘consumer or trader dispute’, you can apply to VCAT for an order. The Civil Claims List at VCAT is located in Melbourne. VCAT has the specific jurisdiction to hear a matter which is ‘consumer and trader dispute(s)’ under the Australian Consumer Law and Fair Trading Act 2012. To refer the matter to VCAT, your ‘consumer and trader dispute’ must involve a dispute between a supplier and purchaser (or possible purchaser) of goods and services.

VCAT can also hear specific debt recovery matters out of other legislation. As an example, VCAT can hear an application from a retail landlord seeking to recover rent under the Retail Leases Act 2003. If you want to apply before VCAT for debt recovery, as an applicant, you must complete an Application to Civil Claims List form.

However, for matters involving a debt of less than $10,000, parties cannot have legal representation for hearings at VCAT. If your matter is eligible, VCAT may award legal costs to you under the Australian Consumer Law and Fair-Trading Act 2012.

As a creditor, if you are successful in obtaining a debt recovery order from VCAT and the debtor fails to comply with such an order, you may apply to the Magistrates’ Court to enforce the order. However, to be able to go to the Magistrate’s court for enforcement, the order has to be for an amount of less than $100,000.

3. Magistrates’ Court-

In Victoria, the Magistrates’ Court has jurisdiction to hear any debt recovery or other matter involving debts up to $100,000. Unlike some other states and territories, the Victorian Magistrates’ Court does not have any small claims division.

To initiate a debt recovery claim in the Magistrates’ court, you will need to submit a Form 5A Complaint. The complaint should outline the details of your claim against the debtor. After filling the complaint with the Magistrates’ Court, you will need to serve (or deliver) a copy of the complaint to the debtor. You can either serve it yourself or you can get a process server or a lawyer to serve the copy of the complaint.

Once your complaint has been served, the debtor has 21 days to either pay the claim or to defend the matter. If the debtor chooses to defend your claim, he/ she can do that by filing a Form 8A notice of defence with the Magistrates’ Court. If the debtor fails to respond within the prescribed 21 days period, you will have the right to obtain a default judgment in your favour.

Where the debtor has filed and served the response, the Court will often organise a pre-hearing conference to try and resolve the matter. If the parties fail to resolve the matter at the pre-hearing conference, a hearing will be scheduled. The court may also transfer the matter to VCAT if it considers that will be a suitable option. If the matter ultimately proceeds to a hearing, your claim will be decided by a Magistrate. The Magistrate will decide, on the balance of probabilities, whether the debt is owed or not and may make various orders including an order that the defendant repays the plaintiff and pay the plaintiff’s legal costs of the proceedings.

4. Supreme Court of Victoria-

If you a debt of more than $100,000 is owed to you, you can take the debt recovery matter to the Supreme Court of Victoria. It has unlimited jurisdiction to hear and decide a debt recovery matter.

However, it is much more costly and time-consuming to take a matter to the Supreme Court.

It is important to note that the statutory limitation under the Limitation of Actions Act 1958 for taking a debt recovery matter to either the Supreme Court or the Magistrates’ Court is 6 years.

5. Alternative Dispute Redressal (ADR) –

Considering the time and expenses involved in availing the mainstream legal system, ADR is a very practical and popular alternative available to you when it comes to debt recovery matters. You may wish to consider mediation as an alternative to going to court.

In mediation, an independent third party (the mediator) assists parties to resolve the dispute themselves. If the parties agree, that agreement will also be enforceable as a contract between the parties. It is a cheaper and faster option to recover your debt while preserving the relationship between the parties to the dispute. Mediation plays a very important role when comes to resolving debt-related disputes between business associates. The Victorian Small Business Commissioner offers low-cost mediation for $195 per party for matters involving small businesses.

If you need more information about debt recovery or you are looking for legal advice or assistance for a debt recovery matter, please contact us at or call us on 0418631798 or email us at

We are here to make your legal journey easier.


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