Debt collection in Queensland: How far to go?

Clifford Gouldson Lawyers


Clifford Gouldson Lawyers is a leading regional provider of legal services to the business, government and not for profit sectors. Established in Toowoomba more than 15 years ago with a commitment to offering specialised expertise in a regional setting we now provide our services across multiple offices within Queensland and interstate.
Recovery of small versus large debts and considerations to help determine the right approach for your business.
Australia Litigation, Mediation & Arbitration
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In a previous Litigation Alert, we provided tips to help your business move to the front of your debtors' payment queue. However, in some cases, it is inevitable that no matter how much effort goes into being the squeaky wheel, bad debt will be incurred. In this alert, we discuss differences in pursuing recovery of small versus large debts and helpful considerations around determining the appropriate approach for you and your business.


Undoubtedly, the size of the debt plays a significant role in determining the appropriate steps in its recovery and how far you're willing to pursue it.

As outlined in this article, the initial steps in the debt recovery process are similar regardless of the debt's size. However, the decision to sue a debtor requires greater consideration. For smaller debts, it is unlikely that starting a court proceeding would be cost-effective because the associated expenses would probably outweigh the debt.

Another important determination is when to involve a lawyer. This is not necessarily determined by the size of a debt, as legal representation can be advantageous even when chasing small debts. As such, this article also offers guidance on where legal assistance is of benefit in the debt collection process.


1. Follow up the debtor

First, you should sufficiently follow up a debtor in relation to an unpaid debt. It is important to act immediately once a debt falls due. We recommend the below timeframe and steps as a guide for following up debtors:

Step 1:
As soon as your payment terms are exceeded, send the debtor an email, text message or letter to touch base.

Step 2:
Phone the debtor if payment is not received within the next 2-7 days.

Step 3:
If the debt remains unpaid after another 7-14 days, contact the debtor once more (by phone and in writing), to note that you will take further action if payment is not forthcoming.

It is important to follow up debtors as they may have unintentionally forgotten to pay the debt or have missed your invoice. By engaging in this process, you prompt the debtor to pay the debt and allow them to explain the delay in payment. It also gives the debtor an opportunity to propose alternative payment terms that might be acceptable to your business, keeping in mind that receiving a slightly reduced lump sum, or the whole debt over several instalments might be quicker and cheaper in the long run.

2. Letter of demand

If the debt remains outstanding after following up the debtor, you should then consider sending a formal letter of demand.

Whether or not you are considering an action in court a key step in the debt collection process is usually issuing a letter of demand. A letter of demand sets out the specific amount owed and the period in which the debtor must make payment before you take legal action.

A letter of demand can also demand the payment of interest on the debt or seek reimbursement of any legal expenses associated with chasing the debt if that is in line with your contractual terms.

While a letter of demand can be sent by you personally or on your company letterhead, it is often more effective to engage a law firm to prepare and send the letter on your behalf. This demonstrates your seriousness in recouping the debt and reinforces the potential legal consequences of not paying the debt.

Multiple clients have approached us after sending their own letters of demand that unfortunately did not result in payment of the debt. In many of these cases, then sending a letter of demand on our letterhead was successful at prompting the debtor to make payment, meaning that further action was not necessary.

3. Commencing legal proceedings

Where a lawyer's letter of demand does not result in the payment of the debt, the option of commencing an action in the Queensland Civil & Administrative Tribunal (QCAT) or Court is available.

In considering whether such action is appropriate, you should bear in mind the following things:

Relationship with the debtor

An existing relationship with a debtor may influence a decision on whether to initiate legal action.

Careful consideration must be given to the potential consequences of pursuing the debt, including assessing whether legal action could potentially:

  1. damage valuable business or personal relationships, not only with the debtor, but also with other relevant third parties;
  2. impact the reputation of your business; or
  3. outweigh the benefits of maintaining a positive relationship with the debtor.


It is crucial to evaluate the commercial feasibility of proceeding with legal action. This involves weighing the amount of the debt against the potential costs and the time investment required, particularly if opting to self-represent.

It is important to consider the estimated costs associated with an action, as legal fees alone can often surpass the value of smaller debts. It's also important to factor in additional expenses, such as court filing fees and process server fees. Moreover, dedicating time to pursuing the debt that could be otherwise spent on your business can be at best, distracting or at worst, disruptive.

Debtor's capacity to pay

Before proceeding with formal debt recovery measures, it's essential to assess the debtor's capacity to pay.

For corporate debtors, conducting searches related to insolvency is pertinent, while for individual debtors, investigating potential bankruptcy is prudent. Additionally, searching the Land titles registers, the Personal Property Securities Register (PPSR), court records, and online search engines like Google can provide valuable insights into a debtor's financial situation.

Likely outcome

It's imperative to assess whether you can substantiate your claim in a court or QCAT proceeding by receiving legal advice on its prospects of success before beginning the proceeding. Once such a proceeding is instigated, it can be difficult to extract yourself.

This involves considering any genuine disputes that could arise. Understanding the risk associated with potential defence strategies from the debtor is crucial. The debtor may also counterclaim against you.


Another important consideration is the appropriate jurisdiction in which to commence an action.

QCAT can hear and decide disputes involving unpaid debts up to a value of $25,000. QCAT is a mostly self-represented jurisdiction, which is beneficial in cases where the facts and documentation are clear that money is owed to you, or where the cost of legal representation would exceed the amount of the debt.

If the facts are complex or the debt exceeds $25,000 and is under $150,000, the Magistrates Court is the appropriate jurisdiction. Otherwise, actions for pursuing debts between $150,000 and $750,000 can be commenced in the District Court, or the Supreme Court for amounts exceeding $750,000. While self-representation is possible in any of those Courts, legal representation is strongly recommended.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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