How do you force a company to pay a debt?

The usual way to collect a debt is to issue a letter of demand then sue if necessary. However, when it is a debt owed by a company, there is a much faster way, which can also be cheaper.

Under the Corporations Act, a creditor can serve a demand for payment on a debtor company, known as a “statutory demand” for any debt over $4,000. The company then has 21 days either to pay, or to go to court to dispute the debt. If the company does nothing in that period, it is then too late for the company to dispute the debt, and the company can be wound up. If the debtor decides to go to court to delay payment of the debt, it will cost them at least $5,000 in legal fees and court filing fees. 

Our policy is that, if the company ignores the demand for 21 days, we prepare the court papers to wind up the company, and send a copy to the company, before filing them in court. This almost always gets a reaction, and usually leads to fast payment of the debt.

Of course, no one really wants to wind up the company. However, the threat of being wound up usually causes the company to pay.

However, you must be careful. Statutory demands should only be used for an undisputed debt. If the company goes to court within the 21 day period, and genuinely disputes the debt, the statutory demand may be set aside, and you will be ordered to pay the company’s costs. The safest rule is that you should issue a statutory demand only when you have an email or other written evidence from the company acknowledging the debt.

Please use our online debt collecting system. It costs $196 with no hidden extras and takes no more than 24 hours.

For more information, contact specialist litigation solicitors Ben Hemsworth or Daniel Hawkes.

 

 

 

 

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