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Is your debt worth pursuing? Knowing when to cut your losses

Reba Maxwell ||

If you’re a small business owner, you may find yourself in a situation where you have supplied your goods and/or services to a client but you haven’t been paid. In this situation, it can be difficult to know whether your debts are worth pursuing and when you should speak with a lawyer for advice or to help with debt recovery.

Taking it to Court

In NSW, in order to sue a person or company for a debt of less than $100,000, you will likely need to commence proceedings in the Local Court of New South Wales. It is important to know before commencing proceedings in the Local Court that:

  1. you will have to pay a filing fee (of up to $618);
  2. the Court proceedings can last anywhere up to 18-months from the time that you commence proceedings through to obtaining an outcome; and
  3. your costs will be capped. This means that even if you are successful in the proceedings, the unsuccessful party may only have to pay a small portion of your legal costs, leaving you out of pocket.

If your debt is worth less than $20,000, the ordinary position of the Court is that it will not award you any of your legal costs pursuant to section 37 of the Local Court Act 2007 (NSW).

So, what are my options outside of Court?

There are several cost-effective steps that we can help you take to attempt to recover a debt without commencing litigation, such as issuing a letter of demand or attending a mediation.

We can advise you on the commerciality of pursuing your debts, your prospects of success, the debt recovery options available to you, and whether chasing a debt is appropriate in your circumstances.

In addition, we can provide you with advice in relation to your existing Terms and Conditions or regarding obtaining security from your clients from the outset in order to bolster your chances of recovery (read our top five tips for getting paid here). By helping you to fully understand your options and working with you to take action accordingly, we aim to help you get paid.

If you would like to discuss your how you can recover payment for goods/services supplied or would like to discuss ways to minimise the possibility of this occurring, please contact Coleman Greig’s Debt Recovery team.

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