Debt recovery & letters of demand in Victoria.

A debt recovery matter has three stages, and most never reach the third. First, a letter of demand sets out the debt, the basis for it and a firm deadline. A significant proportion of debts are paid at this point, because a letter from a lawyer signals that the creditor is serious and the next step will cost the debtor money.

If the letter is ignored, a claim is issued in the court appropriate to the amount, typically the Magistrates' Court of Victoria for most commercial debts. Where the debt is genuinely undisputed and no defence is filed, default judgment can be obtained without a hearing, often within a few weeks of the claim being served.

Judgment is not payment. It is permission to enforce, and enforcement is where recovery actually happens: a warrant of seizure and sale, an attachment of earnings or of a bank account, an oral examination of the debtor's financial position, or, for a corporate debtor, a statutory demand under the Corporations Act, which can lead to a winding up application if it is ignored.

Limitation periods matter. In Victoria, most debts must be sued on within six years of the debt falling due. Chasing informally for years before taking advice is the most common way a recoverable debt becomes uncollectable.