We cannot guarantee a successful outcome in debt collection, some debtors will pay and others will simply make excuses or ignore the matter altogether. Some debtors may already be default listed for other debts and may simply take the view â€œwhat's another defaultâ€ in the wider scheme of things. After the collection process is complete we will make a recommendation to our clients as to what we believe the next appropriate course of action should be. For debts that exceed $1,000 we will refer your file to our Legal Collections Officer who will inform your debtor that the matter has been escalated and the potential for court action has potentially increased, hence an immediate payment can intercept this legal option our client retains. If the debtor still refuses to pay the debt concerned the file will be referred to our Litigation Department to discuss with you your options/costs to initiate court action to recover the debt. It is important not to simply dismiss your legal options based on costs and the following commentary may assist you in deciding what to do next:
Why legal action?
There are a number of reasons that a debtor may not pay their account as per your invoice/terms and/or our demands. There could be a dispute (real or perceived), they may have cash-flow issues, they may have simply forgotten to pay or they are delinquent and are simply ignoring demands for payment. The only authority that can make a binding decision/judgement regarding liability is the courts hence this is the last station on the debt recovery journey.
Are there costs to legal action?
Yes. These are often dependent on the jurisdiction (where the claim is to be heard) and the amount of the debt. Costs will be quoted before you make a decision at each stage of the legal process & any instructions you give should be confirmed to us in writing.
Are legal costs recoverable?
Yes. Generally recoverable & (dependant on the jurisdiction & upon obtaining Default Judgment) costs such as Solicitors costs, filing fees, interest (either default interest or Statutory interest) are recoverable. Some other costs such as search fees are recoverable if the debtor has signed a contract where terms of trade allow for same.
Are legal costs tax deductible?
Yes, if they are a business expense.
Do I have to attend any hearings?
Generally No. EC Credit Control's designated external solicitors will attend to the matter on your behalf if the action is taken through court unless the relevant court forum is small claims court (i.e. In Queensland this would be the QCAT or Queensland Civil and Admin Tribunal) then only the debtor & creditor can attend without legal representation, hence this is when you would attend with your proof of debt to state your case to the appointed court mediator. The small claims court (Administrative Tribunals each has a different function dependant on the state) have a minimal cost in comparison to full court forums.
Will commission be payable if the debt is recovered by legal action you have initiated?
No. However if you have a contract and have included collection costs in the claim then if you are awarded these costs we will charge you commission as you cannot retain such costs unless you have incurred them i.e. you cannot make a profit out of a judgement In either case you will not be out of pocket if the debt is paid in full .
Do I need a contract to commence legal action
No but you should provide some evidence of the debt and how it came to be, i.e. an order, email trail where there is clear evidence of a request for goods & service, delivery docket etc. The absence of a contract will however be a barrier to recovering costs and interest if there is no evidence linking the debtor to your terms of trade. Statutory interest is still recoverable if there is no contract
What are my chance of success without legal action?
We are unable to advise you of this as it is dependent upon the debtors willingness and capacity to pay. Each debtor is different. Considerations you may wish to make are: Is the debtor still trading? Does the debtor have a job? Does the debtor have assets, either cash or property?
How long is the process?
This is dependent on the jurisdiction as some jurisdictions allow differing periods of time for the debtor to respond to the statement of claim after being served. It may also be dependent upon when the legal invoice is paid and whether or not the debtor defends the claim.
What is a Default Judgment
This is effectively a ruling by the court that the debt is a true debt and that the debtor must settle the debt within a certain period of time. If the debtor fails to settle then a Default Judgment allows you to enforce the debt by way of a number of options such as a Garnishee order against wages & salary or bank account, having the debtor undergo an examination by the court, warrant to seize personal or real property etc.
What will happen if I don't go legal?
In all likelihood the file will be closed as unpaid and depending on whether or not you have the appropriate documentation in place the debtor will be default listed which remains as a passive collection tool that may (and often does) see the debtor come forward to make payment at a future date when credit is sought and refused. The chances of being paid are significantly reduced if you do not proceed with legal action after the collection process has been completed.
Legal action is not a fait accompli and as such we cannot guarantee that you will get paid, however if you obtain judgment you will be able to enforce the debt. The limitation period for recovering the debt is also extended, depending upon the jurisdiction but generally around 12 years as opposed to 6 years where no judgement exists. Legal action is used as a last resort and a recommendation to follow this path is not made lightly.
As with the collection process a judgement may only see part of the debt awarded or paid which may not be ideal, however remember when we received the debt nothing had been received in all likelihood so any payment thereafter is a positive result as a result of our action to some extent.
The litigation team are only too happy to answer any of your queries at any stage throughout the process & will make the most appropriate recommendation for you, depending on what has transpired during the collection process.