Communication with the person who owes you money is important. Most debts can be resolved if both parties remain courteous and reasonable. Keep in regular contact with the debtor by mail, email or telephone so the debt does not fall to the back of their mind. Keep a copy of any correspondence and a record of phone calls, including the date and time they were made and what was said.

Find out if there is a reason the debtor cannot pay you. Perhaps they can afford to pay you part of the debt each month. Remember, a court will never place a person under severe financial hardship to pay a debt, so there is no point asking for more than the debtor can afford. Debtors are more willing to pay their debts if the creditor is polite and does not make unreasonable demands. If the debtor feels they are being treated rudely or unfairly, they will often ignore requests for payment or pay other debts before yours. A debtor who genuinely cannot afford to pay will be honest with you so long as you treat them fairly.

When pursuing a debt there are strict rules which apply to your behaviour.

YOU MUST NOT:

This behaviour is likely to anger the debtor will not be as effective as being polite, and may be illegal. A letter of request is a way of formally asking for payment of the debt. It is not a necessary step in commencing legal action.

See Fair Trading Act 1974 s 43

See also ASIC's Regulatory Guide 96 Debt collection guideline: for collectors and creditors.

Additional information for creditors about Minor Civil Actions may be found in Going to Court.

If the debtor does not pay the debt, there are five options:

Instead of taking legal action, or at any stage after you have started legal action, you can offer an Enforceable Payment Agreement to the debtor. An EPA is an agreement for the debtor to pay the debt in installments, and that the creditor will not commence a legal action or report the debt to credit referencing agencies.

If the debtor defaults on the EPA, the creditor can rely on the EPA to issue proceedings (if that has not happened already) and obtain summary judgment.

The EPA Form P2 Enforceable Payment Agreementis available from the Magistrates Court or the Courts Administration Authority website.

2. Further negotiation

Further negotiation may be an attractive option, especially if the debtor indicates they may be able to pay the debt in the future. Use the same techniques described in ‘Negotiation with the debtor’ above. Consider suggesting an EPA as part of your negotiations.

3. Mediation

Mediation is a process where both parties agree to sit down in the same room with a mediator to resolve their dispute. A mediator is a neutral third party who may help with discussions, but it is up to the parties themselves to arrive at a solution. Mediation has a number of benefits:

The Magistrates Court offers a mediation service. You can request mediation at any time, even if you have not already started your legal action. Contact the court for more information on how to access this service.

If you come to an agreement as to how to pay the debt, ensure you put it in writing. An Enforceable Payment Agreement (Form P2) can be used for this purpose.

4. Commencing legal action

There are several factors to consider before taking legal action.

Proof

Can you prove that you are owed money by the debtor? Do you have documentation of the debt such as an invoice, or witnesses who will confirm your version of events? Do you have text messages, letters or emails from the debtor that confirms the debt?

Time

A Minor Civil Claim in the Magistrates Court can be settled at any time. However, it will be some months before a trial occurs if the debtor does not agree to pay the debt. Enforcing the judgment will take some time after this and the debt may not be paid in full straight away but in installments.

If you are representing yourself, you would need to be available in court at the time set for your directions hearing and trial.

Costs

Fees need to be paid when:

The fees are published on the Court SA website. If a fee is payable when you lodge your forms online, the system will calculate the fee. You cannot progress your claim without making payment of the fee.

The fees are added to your claim against the debtor.

5. Writing the debt off

If negotiation and mediation are not successful or possible, and if any of the above factors mean that you do not wish to take legal action, then you can choose not to recover the debt, that is, you can ‘write the debt off’. In some cases, a business debt may be tax deductible.

Sometimes as a result of sending a Final Notice or following letters of demand it becomes clear that there is no real dispute. If an agreement can be reached to repay by installments there is now an option for the parties to enter into an Enforceable Payment Agreement (EPA) (Form P2).

The advantage to the creditor is that if the debtor falls behind in making two payments a claim can then be issued for the outstanding balance, but the debtor will not be allowed to file a defence to the claim. Instead the creditor will be able to obtain a judgment straight away which can then be enforced like any other judgment. [See Uniform Civil Rules rule 62.2(4)]

The advantage to the debtor is that if they abide by the agreement they do not get an adverse credit rating [Uniform Civil Rules rule 62.2(3)] and they do not have to pay the legal costs associated with a claim being issued through the Magistrate's Court.

The first step in making a claim is to find out exactly who you should sue. If you do not put the correct person’s name or business name on the forms, you may have difficulty obtaining judgment or a judgment made in your favour may be set aside. If you do not find out the correct and current address, the debtor may not receive your forms and you may have to start the whole process again.

Similarly, you need to identify yourself correctly on the claim form. If the debt is owed to your business or partnership, use this name on the claim form.

An action can be brought against a person, a business (sole trader or partnership) or a company. If you are not sure who to sue, check any contracts, invoices that you have issued or emai or other type of correspondence. If you have an ABN for the person or entity, you can also check the Australian Business Register, which should identify if you have been dealing with a sole trader, partnership or company. Searching this register is free.

NB the Australian Business Register is different from the Australian Business Name Register - see further information below.

Person

To find the address of a private person:

Business

To find the business (sole trader or partnership) owner's name and the correct business name and address, you can search the Business Name Register on the ASIC Connect website (Business Name Register search). You should name the individual or partners (one or more names) followed by Trading As the business name: John Smith T/A John's Car Repairs.

Company

For a company, you must use the company's name and registered address on any documentation, not the name and address of individuals running the company. To find the correct company name, you can search for it using the company ABN or ACN (these numbers should be on any documentation you have from the company) on the ASIC Connect website (Company Register search).

To get the registered address of a company, you can:

Further information can be obtained from ASIC on 1300 300 630.

Before commencing proceedings in court, a notice of intention to sue should be given to the debtor. If no notice of intention to sue is given, the costs of filing the claim will not be recoverable. Notice of intention to sue can be given by EITHER filling out and serving a Final Notice (Form P1) OR serving a written pre-action notice of intention to commence action (i.e. a Letter of Demand).

Final Notice

A Final Notice (Form P1) gives notice to the defendant that you intend to start an action to claim the debt owed to you. This form can be obtained from the Magistrates Court Registry or Courts Administration Authority website

There is a cost for the form. The Registry will stamp the form, but you must serve it yourself; the court will not do it for you.

After serving the form on the respondent, you must wait a minimum 21 days for a response before taking any further action. Send an Enforceable Payment Agreement with the Final Notice if you are willing to accept payment in installments.

No written pre-action response (explained in further detail, below) is required from the respondent if the prescribed Final Notice form (Form P1) is used [r 332.3(3)]

Written notice of intention to commence action

A written pre-action notice is a formal request that the debtor pay you the money owed.

A final letter of demand can be used instead of a Final Notice (Form P1) but to be considered a written pre-action notice of intention to commence a claim under the Court Rules, it must include:

[see Uniform Civil Rules rule 332.3(1)]

The debtor is then required to serve the creditor with a pre-action written response within 21 days. If no response is served, this may be taken into account in determining any costs awarded in the action. [r 332.3(2)]

The pre-action response must include:

[see Uniform Civil Rules rule 332.4(1)]

Service

You must serve your Final Notice (Form P1) or pre-action notice (letter of demand) on the debtor.

There are a number of ways to serve court documents.

1. Personal delivery: The documents can be served by handing them to the debtor (or director) as long as you can identify the debtor. If you want to serve the documents personally, you may also use an agent or process server for a fee.

2. Post: The Rules require that documents are served using Express Post. You must keep your lodgement receipt and proof of delivery to exhibit to your affidavit of service.

3. Court Sheriff: For a fee, you can ask the court to serve documents. This ensures that the documents are served properly as long as your address is correct and the Sheriff can find the debtor. The Sheriff will also complete the affidavit of service.

4. Email: If you have previously been communicating with the debtor by email, and you are sure that the debtor uses the email address regularly, you can serve the documents by email. You may also use a business email address if the debtor has one specifically for the service of documents.

5. Electronic service: In some instances, the number of documents to be served will be significant. The Rules allow for service in electronic form provided particular requirements are followed (Uniform Civil Rules 2020 (SA) r 42.4].

Once a matter commences, a further service option is portal service [see r 42.5].

If the debtor does not pay the debt or try to negotiate within 21 days of being served with a Final Notice (Form P1) or pre-action notice (letter of demand) you can begin formal legal action. You will not be able to claim your costs if you do not allow the debtor 21 days to respond.

Step 1:

Complete a Claim (Form 1), which you can get at the online portal CourtSA Civil or the court registry.

A claim must be accompanied by a statement of claim, which may either be [r 333.1(3) and r 63.1 (5)]:

A Statement of Claim uploaded with a Claim is a Form 1S.

Information required on claim form

You as the creditor will be called the applicant. The debtor is called the respondent. The names and addresses of both of the parties must be filled in and at the bottom of the form under the heading 'Statement of Claim' the applicant must provide details of what the claim is about.

A debt claim can be very brief, and if it is a under $12,000 you can enter the details straight into the online form (less than 100 words).

Remember that you will need the respondent’s address and other contact information. If the respondent is a company, you need to do a search on the Australian Securities and Investments database for a current company search to obtain details of the registered office. Claims against companies must be served on the registered office in accordance with section 109X of the Corporations Act 2001 (Cth).

Step 2:

Serve the claim on the respondent debtor:

No response

If the respondent does not respond within 28 days, you can apply for default judgment to be signed without the need for a court hearing. To do this, you must complete a Form 76B - Application to Registrar-Sign Judgment and file it with the court with proof that a Form 1 or 1S Claim has been served on the debtor, and that you have waited at least 28 days for a response.

This judgment can be set aside if the respondent can show they did not receive the claim. This is why it is important to find out the respondent's correct address, and, if there is any doubt about the address, to have a Sheriff's Officer serve the claim or for the applicant to serve it personally on the respondent.

Admission of the claim

If the respondent admits the claim and agrees to pay or act, the parties should to negotiate a specific final date for payment or action. If the respondent does not pay or act by the agreed date, follow the process set out above for having judgment signed against the respondent, and then apply to enforce the judgment by issuing an investigation hearing using a Form 141- Application to Enforce Judgment.

The respondent can admit liability for all or part of a debt owed. If the respondent only admits part of the debt owed, and this is not satisfactory, you can continue with the action. However, the applicant may have to pay the respondent's costs if the court awards no more than what the respondent paid into the Court.

A respondent can admit liability for a debt by filing an Enforceable Payment Agreement (Form P2) document with the Court.

Denial of liability - Defence

Cross Claim (including a counter claim)

Directions hearing

If the respondent files a defence, the court will send both parties the date, time and place of a directions hearing. A directions hearing is not the trial but is held to determine the position of each party and to encourage a resolution of the matter. You do not need to bring any witnesses to a directions hearing. Mediation may be suggested by the court.

Examples of orders which may be made at a directions hearing are:

It is important that you understand and comply with any orders made by the court at the directions hearing. If you are confused about what orders the court has made, you may get a copy of the court record of your hearing from the Magistrates Court Registry. If you do not understand the order, you may ask at the Registry.

Preparing for trial

Discovery

Each party to a minor civil action must file and serve a list of all relevant documents within 14 days of the filing of a defence (or if a cross claim is filed, within 14 days of the time for filing a defence to the cross claim expires [r 336.1) The List of Documents should be filed using Form 73A – List of Documents.

Before the trial, if one party believes the other party has further documents that will be needed he or she can make a written request for a list of the documents that relate to the claim discovery, and request to see them. A party providing discovery must, at the request of the other party, provide a copy of the documents [r 336.1 (3)].Unless the court orders otherwise, a request for a copy of discovered documents must be complied with before the first directions hearing [r 336.1 (4). If a party comes into possession of a discoverable document after the first directions hearing, that party must notify the other party of the existence and location of the document [r 336.1 (5)].

If the other party does not comply with the requirement for discovery, the court may order the party to complete discovery. Permission is required to make the application but it can be asked for as part of the application for the order. The application is made by filing an interlocutory application (Form 77) and by completing an affidavit (Form 12) explaining that a written request was made and that the other party did not comply with that request (a copy of the letter sent to the other party should be attached to the affidavit). This application and the supporting affidavit is served on the other party by post and the court fixes a hearing date on the front of the application at which both parties must attend to decide the matter. If an application of this type has to be made it should be done promptly so that there is time for it to come before the court and be dealt with before the trial.

If one party believes someone else has documents which will be needed at the trial and that they will not voluntarily attend at the trial a summons to witness to produce documents can be issued and served on them before the trial. This form can be filled in at the court registry. It is up to the person who asks for the summons to be issued to serve it on the person and this has to be done a reasonable time before the hearing date.

A summons to witness can also be issued and served in the same way to make sure that someone whose evidence is required at the trial (e.g. such as a witness to an accident) will attend. The witness’s reasonable expenses to come to the court have to be paid to them.

If an interpreter is required this can be arranged by the court registry. This should be done as soon as possible after the court date has been fixed.

A setting down for trial fee applies to matters that are listed for trial [Magistrates Court Regulations 2021 r 4(1)]. This fee varies depending on the value of the claim, and must be paid by the plaintiff within 14 days of the day on which the trial date is set. The trial will not proceed on the day listed until the fee is paid. If there is more than one applicant, the fee can be paid in equal portions by each of the applicants.

To view the current Magistrates Court fees, visit the Courts Administration Authority website.

Trial

If your matter does make it to trial you should be prepared in the following ways:

You will be called into the courtroom when it is time to hear your matter. The witnesses will be asked to wait outside. You should stand whenever the Magistrate enters or leaves the court and address him or her as ‘Sir’ or ‘Madam’ or ‘Your Honour’.

The procedure for Minor Civil Claims is less formal than in most other courts. The Magistrate will conduct the hearing more like an inquiry, and will ask questions of the parties, ask to see documents, and ask any questions of any witnesses. Speak slowly and clearly as the Magistrate and their clerk will need to write down details. If you are confused about the procedure you may ask the Magistrate questions.

Lawyers are only allowed in certain circumstances (e.g. if the other party is a lawyer, or if all parties agree or the court is of the opinion that a party would be unfairly disadvantaged without a lawyer and gives permission).

[See Magistrates Court Act 1991 (SA) s 38(4) and Uniform Civil Rules 2020 rule 25.1(4)]

Once the trial has finished the Magistrate will decide if the debt is owed to you. Sometimes the Magistrate reserves their decision for a later date. Depending on the claim, you may be entitled to costs and interest which is added to the total debt.

If you are unhappy with the court’s decision, you can ask for a review. For more information about a minor civil review, see Review of a Minor Civil Judgment.

After judgment, it is up to you to enforce it.

Many debtors pay once judgment has been given but you may need to remind the judgment debtor to pay the debt. If you do not think the debtor will pay, you can commence enforcement proceedings immediately after judgment.

You generally have only six years from the date of the judgment to start enforcement proceedings. Even though section 34 of the Limitation of Actions Act 1936 (SA) allows 15 years from the date of the judgment to enforce the debt, rule 201.5 of the Uniform Civil Rules 2020 provides that if a judgment creditor wishes to enforce a debt after 6 years, the creditor must obtain the leave (permission) of the Court to proceed.

A court judgment will be entered on the credit record of the debtor for five years. This means they may not be able to obtain credit or borrow money. In many cases, this may be incentive enough for them to pay the debt.

You may wish to serve an Investigation Notice [Form 140] on a judgment debtor requiring them to answer questions relating to their means to pay the judgment debt, and to produce for inspection documents relating to these questions [Enforcement of Judgments Act 1991 (SA) s 3A]. This will allow a judgment debtor the opportunity to comply, and deal with their ability to make repayments informally, and avoid court fees being added to their debt. The judgment debtor has 28 days to send the completed Investigation Notice back to you at your address for service within 28 days.

If you are able to negotiate a payment arrangement, this can be lodged with the court to make the order using a Form 142 Consent Order for Payment [Uniform Civil Rules r 203.5].

If no payment arrangement is negotiated, you may lodge an Application to Enforce Form 141 in the usual manner set out below.

The next process in the enforcement of a judgment for a debt of $12,000 or less is an investigation hearing. If the debtor is present at court, you can ask the Magistrate to conduct an investigation hearing into the respondent’s financial position immediately after giving judgment.

To request an investigation hearing, you will need to lodge an Application to Enforce a Judgment (Form 141) [r 203.4]. The Registry will then issue an investigation summons to the judgment debtor which is served by the Sheriff. You will be advised of a time and date for the investigation summons hearing and you should attend.

Before the Investigation Summons hearing, the judgment debtor is required to complete a Form 145 Questionnaire form detailing their financial situation. This will include how much they spend on rent, bills, food and other expenditure, as well as information about their assets and liabilities.

During the hearing you will have a chance to question the debtor on this information. The Registrar in charge of the hearing will then usually make an order for the debt to be paid in installments.

The court will only order the debtor to pay installment amounts they can afford. If the debtor has no means to pay the debt, the court can adjourn the hearing if the debtor’s circumstances are likely to change.

An order for payments in installments is the most common order made. You will need to make arrangements for payments to be made to you direct, and monitor the payments to ensure the court order is kept.

If the judgment debtor fails to appear for the hearing, the court can order the issue of a warrant of apprehension to have the debtor brought before the court as soon as possible. You will need to complete the Application to Enforce a Judgment (Form 141) [r 201.6] and pay a fee for the warrant to be executed. This cost is added on to the total amount payable by the debtor. If the debtor is apprehended, the Sheriff will take them to the nearest court for a hearing which may mean you cannot attend. You will be notified of the outcome.

If the debtor misses two or more payments under the order made at the investigation hearing, you can apply for an examination hearing on an Application to Enforce a Judgment (Form 141) [r 203.7]

At this hearing the debtor will be asked to explain why he or she has not complied with the order from the investigation hearing. If the creditor’s circumstances have changed then the installments to be paid under the order may be modified.

If the court is not satisfied that the judgment debtor has a reasonable excuse for failing to make payments, the court can issue a Warrant of Commitment, which may result in the imprisonment of the debtor for up to 40 days. This does not extinguish the debt.

You may wish to consider other orders to enforce the payment of a debt. These can be made at any time after the investigation hearing.

Other orders will not be made if there is a payment agreement in place from the investigation or examination hearings.

A warrant of sale can be issued in relation to either the debtor’s real property (land) or personal property (such as non-essential household items). It is a good idea to check if the debtor owns a home or land, or has other significant assets before you enforce judgment. These will be disclosed on the debtor’s financial statement or you can search the records of ownership of land for a fee at the Land Services SA.

If the debt is for $12,000 or less (and does not relate to the running of a business), you cannot issue a warrant of sale as the first step in enforcing the debt. It is only when the debtor misses 2 or more payments after an order made at an investigation summons hearing that you can ask for a warrant of sale. Further, if the debt is for $12,000 or less, you cannot issue a warrant of sale of land unless a warrant of sale of goods has first been issued and has not satisfied the debt [r 203.2(4)].

To apply for a warrant of sale, you need to complete an Application to Enforce a Judgment (Form 141) [Uniform Civil Rules 2020 (SA) r 203.10]. You also need to include a copy of the certificate of title for the property, which is obtained for a fee from the Land Services SA.

The process for the sale of the debtor’s property is covered in rule 206.7 and section 7 of the Enforcement of Judgments Act 1991 (SA). The Sheriff’s office is responsible for executing the warrant, and will contact you regarding the sale. You also need to undertake to pay the Sheriff’s fees in executing the warrant. You also must register the warrant on the title with the Land Services Group. You may need to use a conveyancer to prepare the forms as required.

Section 7 (2) of the Enforcement of Judgments Act 1991 (SA) prohibits the sale of personal property that cannot be taken in bankruptcy to satisfy a warrant of sale. This means that goods such as household items, a motor vehicle worth less than $9,100 and tools used to earn income with a value of less than $4,200 are protected, and cannot be taken by the Sheriff to sell to pay the debt (as at 1 July 2023).

A charging order allows the court to “charge” the property of a debtor. This means that the debt will be registered on the real estate of the person or on the assets of a company. If the property is sold then it will be subject to the charge and you have priority over the owner for any proceeds of the sale.

To apply for a charging order you need to complete and lodge an application and affidavit and a Form 150 draft order. You need to also obtain a copy of the certificate of title for the debtor’s real property.

Costs are fixed under the rules for obtaining a charging order, and include the cost of preparing the charging order for lodging and registration over the debtor’s property, as well as the cost of lifting the order once the property is sold. A charging order does not give you the right to sell the property so you will have to wait until the property is sold by the debtor or someone else.

If you are unsure about how to obtain a charging order and what forms you need to complete, get legal advice. You may also need to engage a conveyancer to prepare the right documents to lodge with the Land Services Group to register and remove the charging order.

This is an order requiring a third party to pay the debtor’s money to you. It may be money held in a bank account, dividends or wages. In South Australia, a debtor must consent to wages being garnisheed before an order can be made.* A Centrelink income is protected and cannot be the subject of a garnishee order.

*Since 18 September 2023, it has become possible for the court to make an order garnishing the salary or wages of a debtor without the debtor's consent. However, the debtor's net weekly salary or wages after tax must not be garnished such that the debtor is left with less than 90% of the weekly national minimum wage under the Fair Work Act 2009 (Cth), and the court must consider it appropriate [Enforcement of Judgments Act 1991 (SA) s 6].

Seek legal advice on the correct procedure for a garnishee order.

If the debt is for more than $10,000 you may start bankruptcy proceedings against the debtor. If a person is declared bankrupt then all of their property (with exceptions similar to those for a warrant of sale) comes under the control of a trustee. You can lodge a proof of your debt (the judgment) with the trustee to receive a share of the profits from the sale of the debtor’s property if the debtor owns anything of value.

Consider carefully if making a person bankrupt is worthwhile. If the debtor has no assets or is a low income earner, the likelihood of a return is minimal. Making a person bankrupt involves considerable cost, and there is also the risk that the debtor will declare themselves bankrupt first if they have a number of debts.

The first step in making a person bankrupt is issuing a Bankruptcy Notice. This form requires the debtor to pay the debt within 21 days and is available on-line from the Australian Financial Security Authority (formerly ITSA). The cost of issuing a Bankruptcy Notice changes every year so it is wise to check the fees and charges on the AFSA website for any updates. A bankruptcy notice can only be issued for a judgment debt.

Once 21 days have elapsed from the service of the Bankruptcy Notice on the debtor, a creditor’s petition must be lodged in Division 2 of the Federal Circuit and Family Court. There are fees associated with filing a creditor’s petition, which can be claimed back from the bankrupt estate, assuming that there are any assets for the trustee to seize.

Current court filing fees for bankruptcy matters can be checked on the Federal Circuit and Family Court website [links opens in new window].

Making someone bankrupt is a complex and expensive process. You should seek independent legal advice before commencing bankruptcy proceedings. Further information on bankruptcy proceedings can be obtained from the website AFSA 'Sending Someone Bankrupt' . Information about filing creditor’s petitions is available at the Federal Court Registry, or from the Federal Circuit and Family Court creditor's petitions website.

Winding up a company is the equivalent of declaring a person bankrupt, although the end result for the company is that it is usually liquidated and then de-registered.

If your judgment debtor is a company, you should seek legal advice from a private law firm regarding how to go about issuing the right documents. If a company has no assets and many creditors, spending the money on issuing winding up proceedings does not guarantee that your judgment debt will be paid, and you may also not recover your associated costs.