When someone owes you money, getting it back can sometimes feel difficult and stressful.
You may have lent money to a friend or family member, paid money on someone else’s behalf, or provided goods or services that were never paid for. You may have asked for the money back several times, but the person still refuses to pay.
So, what can you actually do?
If you are an individual in NSW trying to recover money from another person, there are several steps you can take before considering court proceedings.
Make sure you can show that the money is owed
The first question is whether you can demonstrate that the other person owes you the money.
Useful evidence can include:
- a written agreement;
- a loan agreement;
- bank statements showing money was transferred;
- text messages or emails;
- invoices or receipts;
- records of conversations;
- photographs or documents relating to the transaction; and
- messages where the person acknowledges that they owe you money.
You do not necessarily need a formal written contract for a debt to exist. However, having clear evidence can make it easier to establish your claim if the matter is disputed.
For example, if you transferred $10,000 to someone as a loan, evidence showing the transfer and messages discussing when the money was to be repaid may be important.
Ask for the money back
Before taking formal legal action, you should generally consider asking the person to pay.
Keep your communication clear and in writing where possible.
Explain:
- how much you believe is owed;
- why you believe it is owed;
- when you expected to be paid; and
- when you would like payment to be made.
If the person is experiencing financial difficulties, you may also consider whether a reasonable payment arrangement could resolve the matter.
Consider sending a Letter of Demand and/or commencing Court Action
If the person does not pay after you have asked them, the next step may be a Letter of Demand.
A Letter of Demand is a formal written request for payment. It sets out the amount being claimed, why it is owed and when payment is required.
If you do not receive a response with a Letter of Demand or the person refuses to pay, it may be worthwhile commencing proceedings in Court to recover the debt.
The appropriate court will depend on the amount and nature of your claim.
For many civil money claims in NSW, the Local Court has jurisdiction for claims up to $100,000. Claims up to $20,000 are generally dealt with in the Small Claims Division, while claims over $20,000 and up to $100,000 are generally dealt with in the General Division.
There are exceptions depending on the circumstances, so it is important to make sure your claim is brought in the appropriate jurisdiction.
How LegalWise Solutions can help
Recovering money from another individual does not always mean going straight to court.
At LegalWise Solutions, we can help you understand your options and determine a practical approach to recovering money that is owed to you.
FREQUENTLY ASKED QUESTIONS
There is a difference between someone who accepts that they owe the money but refuses to pay and someone who disputes that they owe the money at all.
For example, the person might say:
- the money was a gift rather than a loan;
- they already repaid you;
- you agreed that they did not have to repay the money;
- the amount you are claiming is incorrect; or
- there was a different agreement between you.
If the debt is disputed, you should carefully consider the evidence before commencing proceedings.
If the court makes a judgment in your favour, the person who owes you money becomes a judgment debtor.
Ideally, they will pay the amount ordered.
You may need to take further steps to enforce the judgment. This may include:
- Garnishee orders
- Examination procedures
- Writs of execution
The appropriate enforcement method will depend on the debtor’s circumstances and what assets or income may be available.
This is something you should consider before commencing court proceedings.
Even if you can prove that someone owes you money and obtain a judgment, recovering the money may be difficult if the person has:
- no significant assets;
- little or no income;
- multiple creditors; or
- other financial problems.
It is important to consider the likely costs and practical prospects of recovery before taking legal action.
There are limitation periods that can apply to debt claims.
For many debts in NSW, the limitation period is six years. However, the relevant date and applicable limitation period can depend on the circumstances of the debt.
