Recovering money you are owed in NSW
From the letter of demand to judgment and enforcement. Clear steps, in the right court.
An unpaid invoice affects your cash flow.
The law sets out a clear path to recover it.
The steps are a letter of demand, a court claim, judgment, and enforcement.
We tell you which steps suit your debt, and act for you at each one.
The letter of demand
A letter of demand asks the debtor to pay what is owed.
It states the amount, why it is owed, when it was due, and what will happen if it is not paid by a set date.
It may resolve the matter without going to court.
If the matter goes to court, it shows that you asked for payment.
A letter of demand from a solicitor must be fair and accurate.
It must not threaten criminal proceedings or a complaint to an authority as a way to obtain payment of a civil debt.
It can state that court proceedings to recover the debt will be started if payment is not made.
The statement of claim
If the debt is not paid, the next step is to file a statement of claim in the correct court.
The statement of claim must then be served on the debtor at their correct name and address.
A court filing fee applies.
The court depends on the amount claimed.
- Local Court, Small Claims Division: claims up to $20,000.
- Local Court, General Division: claims over $20,000 and up to $100,000.
- District Court: claims up to $1,250,000, or more if the parties consent.
- Supreme Court: claims above the District Court limit.
Default judgment
After service, the debtor has 28 days to respond before you can take further action.
The debtor may pay, ask to pay by instalments, or file a defence.
If the debtor does nothing, you may apply for default judgment.
A judgment is a court order confirming the amount the debtor owes.
If the debtor files a defence, the matter goes on to a hearing.
Enforcing the judgment
A judgment does not pay itself. If the debtor still does not pay, enforcement options include:
- An examination notice, requiring the debtor to give details of their income, expenses and assets.
- An examination order, requiring the debtor to attend court and answer questions about their finances.
- A writ for the levy of property, directing the sheriff to seize and sell the debtor's property.
- A garnishee order, directing an employer, bank or other person who holds money for the debtor to pay it to you.
- Bankruptcy of an individual debtor, in some cases.
A judgment can generally be enforced for up to 12 years from the date it was made.
Do not wait too long
In NSW, a claim founded on a contract must generally be started within six years from when the cause of action first accrued.
Time can start again if the debtor acknowledges the debt in signed writing, or makes a payment towards it.
A claim on a deed has a twelve year limit.
Where creditors get caught
- Suing the wrong party.
A claim against a business name instead of the person or company behind it can fail or be delayed. Confirm the correct legal name and address first.
- Letting the time limit run out.
A contract debt claim must generally start within six years. Older debts may be lost.
- Threatening the debtor.
A demand must not threaten criminal proceedings or a complaint to an authority to obtain payment of a civil debt.
- Filing in the wrong court or division.
The amount claimed decides the court. Filing in the wrong place costs time and fees.
- Stopping at judgment.
Judgment is a court order, not payment. Enforcement is a separate step.
- Having no written terms of trade.
Clear signed terms on payment dates and interest make a debt easier to prove.
Common questions
How long do I have to recover a debt in NSW?
For a contract debt, generally six years from when the cause of action first accrued. A signed written acknowledgment or a part payment can restart the period.
Which court do I file in?
It depends on the amount. The Local Court hears claims up to $100,000, with claims up to $20,000 in the Small Claims Division. The District Court hears claims up to $1,250,000.
What if the debtor ignores the statement of claim?
After 28 days from service, you may apply for default judgment.
What if the debtor still does not pay after judgment?
You may enforce the judgment, for example by an examination notice, a writ for the levy of property or a garnishee order.
Can a letter of demand mention police or criminal charges?
No. A solicitor must not threaten criminal proceedings to obtain payment of a civil debt.
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