Debt

Debt is money that is due for the payment of something. Debt can arise from many things – unpaid invoices, unpaid loans and mortgages to name a few. If debt isn’t managed effectively, it can easily spiral out of control. It is easy for debt to accumulate, especially where interest is payable on the debt. Non-payment of debt can have serious ramifications, such as seizure of assets or even bankruptcy.

Personal/Individual Debt

Personal debt is money that an individual owns, either by way of loans or invoices due. Some common examples of personal debts include:

• Credit cards
• Mortgages
• Car loans
• Student debt (such as HECS or other HELP loans)
• Small business loans
• Tax debt

Non-payment of personal debts can lead to assets being seized or sold and even bankruptcy.

Business/Company Debt

Business debts are debts that a business accumulates for the payment of its expenses. This can take the form of business loans, tax debts or other debts to creditors. A business which cannot pay back its debts is insolvent. A business which is insolvent still has options available. These include:

• Voluntary Administration
• Receivership
• Liquidation

Legislation

The Australian Securities and Investments Commission (ASIC) is the national corporate regulator. Its role is to enforce the Corporations Act 2001 (Cth). It is important to ensure that you, as a business owner, are complying with the rules set out in the Corporations Act. There are serious penalties for individuals and businesses who do not.

The Australian Financial Security Authority (AFSA) is the national body which deals with insolvency matters.

What is a Debt Management Lawyer?

A debt management lawyer is a lawyer with expert knowledge in managing debt, debt recovery and collection as well as dealing with debt when a company is winding up. Most debt management lawyers will give business advice on the efficient collection of debt or negotiations with creditors to the business. In managing debt, these lawyers are not only able to chase debt but can also implement policies that are used when working with creditors and debtors. This might include the creation of terms and conditions of sale. If a business is nearing insolvency, a debt management lawyer will also be involved in the distribution of remaining assets and advice to creditors that are looking to recover money from an insolvent business.

Why do I need a Debt Management Lawyer?

There are a few scenarios where you will need a debt management lawyer. Primarily, for debt collection – you may need a lawyer to chase customers who are refusing to pay their debts. Besides this, if you are looking to implement terms and conditions surrounding the repayment options for customers, a debt management lawyer will be able to draft these. If you are running or managing a company that may go insolvent, debt lawyers also know the processes undertaken during insolvency.

More generally, debt management lawyers can give you general advice regarding the debts of your business. If you have personal debts, a Debt Management Lawyer can advise you on your options to pay back the amounts you owe.

What will a Debt Management Lawyer provide?

Conditional on what work the lawyer is completing, they will aim to provide an appropriate and effective solution to your matter. If they are completing the process of debt recovery, they will seek to understand the most viable recovery option, whether it is through a dispute resolution process or legal action. They will be able to provide general debt advice as well as the creation of terms of sale. If a debtor wants to arrange a loan agreement to pay back a debt, they will be able to draft this agreement.

How much will a Debt Management Lawyer charge?

Debt management lawyers like most business lawyers will charge by the hour. In some cases, they may offer an initial consultation for free or a set cost. After the initial meeting, they will charge by the hour for the work that needs to be completed. If a lawyer is chasing a debt, a debt may need to be resolved through legal proceedings. Costs will increase if this is the case and can often depend on the amount that needs to be recovered.

Our aim at LawPath is to provide you with legal options that are fast, affordable and tailored to your bankruptcy needs. We’ll connect you with an experienced debt management lawyer that is best suited to your individual needs. This allows you to choose the solution which is best tailored to your situation.

Hourly rates and Court fees

The cost of a Debt Management Lawyer will vary based on the scope of the work. Small issues likely to be addressed quickly will cost less. For matters that will need to go to the relevant Court or Tribunal, there may be additional fees involved, particularly as this work takes time. These types of matters may also involve obtaining documents and negotiating with the other party.

What can a Debt Management Lawyer legally charge?

Legal costs can rise very quickly, especially in litigation. However, this is sometimes hard to avoid when work is being done by a lawyer on an hourly basis. Where fixed-fees are not offered by the lawyer, you should expect to be invoiced on a monthly basis with a time period within which you are required to make payment. Lawyers are required to adhere to the rules outlined in the relevant acts. For example, in NSW and Victoria, this is the Legal Profession Uniform Law 2014. Lawyers who do not comply with these rules can face disciplinary action from the law society of their State.

Lawyers are required to provide to their clients a document called a ‘costs disclosure’ if your costs will be higher than $750.00. This document will outline how costs will be calculated in relation to your case. Also be mindful that costs are divided into ‘professional costs’ and ‘disbursements’, and you will be expected to pay for both. Professional costs are the costs of the actual work done by the lawyer, whilst disbursements cover incidentals such as court filing fees, telephone calls, photocopying charges – amongst other things.

What if I don’t agree with the costs?

You have the right to request an itemised bill that will outline how much time was spent on each task in relation to your matter, and how this adds up to the fee you’re requested to pay. If you wish to dispute the cost, you can make a complaint to the The Office of the Legal Services Commissioner (OLSC) and they will investigate the matter and may allocate a costs assessor. You can also take further legal action in the Courts if you feel you have been unfairly charged.

Further information

• When Will a Director be Held Responsible for Company Debts?
• Steps to take to Collect your Small Business Debts
• How To Deal With Debt Collectors
• When Can Shareholders Be Responsible For Company Debt?