What Is the Process for Debt Recovery Proceedings?

Debt collection is defined as seeking payment from consumers or businesses that are bound to pay or repay money they owe. The Australian Competition and Consumer Commission (ACCC) has outlined a number of key guidelines for debt collectors seeking payment. You can read more about the initial guidelines for debt collectors here. This article focuses on the situation where these guidelines have failed. In this case, legal proceedings should be initiated to settle the outstanding debt. This could occur due to the inability to contact the debtor or agree on payment terms. Below are the steps involved in debt recovery proceedings. Please note that the process may differ slightly depending on the state jurisdiction.

1. Making a claim

A statement of claim is a document that stipulates why you are lodging a claim against another party and what they owe you. The value of the claim will determine which court will hear the debt recovery proceedings. A Local Court will hear claims of up to $100,000. A District Court will hear claims between $100,001 and $750,000. A Supreme Court will hear claims of $750,001 onwards. It is essential that all relevant facts and details are included in the claim. A failure to do so could see your claim being lost or dismissed by the court. Furthermore, matters outside the statement provided cannot be argued before the court. 

2. Service

Once the statement of claim has been filed, it must be served on the debtor. This process will vary slightly depending on the type of party being served and the state jurisdiction. However, the underlying notion is ideally handing the statement to the individual or entity physically. The debtor then has 28 days to respond to the claim. From here, two situations may arise:

Undefended proceedings

This occurs where the debtor does not reply to the statement of claim within the 28 day period. In this case, you may make an application for a default judgement. This will award the amount owed by the debt as well as court costs. This is subject to the debtor having a reasonable excuse for not responding to the statement of claim. 

Defended proceedings

This occurs where the debtor believes they have a defence to the debt recovery claim. The parties’ written statements of the facts supporting their claim will form the basis of the later hearing. For example, the debtor may claim that they have already paid back or partially paid back the debt. Proof of payment will be crucial in this instance. Another example could include mistaken identity, where the debt is not yours to pay. The court will make an appropriate ruling in this instance.

3. Court Appearances

Multiple court appearances are required in a hearing to reconcile the disparity in the parties’ submissions. A directions hearing usually takes place initially to set up a brief timeline for the trial. This may be followed by a review prior to trial to ensure all requisite directions have been met. This ensures that the trial flows smoothly. The trial then occurs with a judge or magistrate determining the outcome based on the parties’ arguments and evidence. Legal costs and interests are added costs that may be added onto the judgement for either side. 


It is important to first seek legal advice to assess your chances of success before initiating debt recovery proceedings. The legal process can often be avoided by both sides playing a part in being cooperative. Debtors should be treated with fairness, respect and courtesy. In return, debtors should communicate honestly and openly to try and come to a mutual resolution. Obviously this will not be possible in some circumstances where the facts are disputed. This is where the process for debt recovery proceedings becomes necessary.

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