Letters of Demand – helpful things to know…
Once you have issued a letter of demand, there are four common scenarios:
1. The Debtor/s respond to your letter of demand and make payment of the outstanding amount;
2. The debtor/s respond to your letter of demand and say they can make payment, but not by the date requested in the letter;
3. The debtor/s respond to your letter of demand and say they will not pay; or
4. The debtor/s do not respond to your letter of demand.
If you find yourself in scenario (1), that is great. The debt owed to you has been paid.
If you find yourself in scenarios (3) or (4), please read the article: First Steps to Getting Your Money Back for further information.
If you find yourself in scenario (2), there are a couple of options.
Firstly, you can demand the debtor make payment by the due date. If payment is not made, you can proceed with filing a Statement of Claim. However, this process is often delayed (for example, you have to give a debtor at least 28 days to respond to a Statement of Claim) and it can also be costly (for example you will need to pay the Court filing fee and a fee for service). You may also need to take further steps if the debtor does not respond. Please read the following article My invoice remains unpaid after Default judgment. What can I do? for further information.
Alternatively, you can enter into a Deed of Settlement and Release with the debtor which includes:
– A payment plan schedule;
– A definition of the amount outstanding to be paid by the debtor;
– A term that contemplates the debtor failing to adhere to the payment plan;
– A term that defines any interest that may accrue on the outstanding debt; and
– A consent judgment signed by the debtor.
A term that contemplates the debtor failing to adhere to the payment plan is known as a “default clause.” In the event of “default” by the debtor, the clause will enable you, as the creditor, to file a consent judgment signed by the debtor.
Consent Judgment
A consent judgment is a court document, signed by both parties, consenting that the Court make specific orders in relation to a matter. When a consent judgment is included in a Deed of Settlement and Release, it often includes orders that the debtor pay the creditor the balance of the outstanding debt, and the creditors’ costs for pursuing the unpaid debt.
A consent judgment has a similar legal effect to default judgment. It can be filed with a Summons where no legal proceedings have commenced.
Enforcement
Once a court makes orders in accordance with the consent judgment, the creditor (now the Plaintiff), can proceed with enforcing the outstanding debt. For more information on enforcement procedures, please read My invoice remains unpaid after Default judgment. What can I do?
If you require assistance with, or advice on, the best way to ‘get your money back’ from your debtors, please contact our friendly Streeterlaw team on contact@streeterlaw.com.au or 02 8197 0105 and we’d be happy to assist you.
