Collecting unpaid debts can be a relatively painless or incredibly arduous process. On one end of the spectrum, some clients are simply forgetful or cash flow constrained. Typically, follow up requests for payment are met with friendly and slightly embarrassed apologies, and payment is forthcoming in due course.
But on the other end of the scale, debt collection can be a time consuming, stressful and hostile interaction. While the percentages are small, there are a tiny fraction of debtors who are hard to reach and who give the phrase “getting blood from a stone” new meaning.
In these extreme cases, follow up requests, continued reminders, formal letters of demand and threats of legal action have zero effect on recovering your unpaid bill.
So in the event that you have to involve the legal system, what are the key things to know?
Weigh Your Options
The first thing to do before going down the legal route is to value the debt accurately and objectively. This involves taking the emotion out of the equation. It is common for business owners and managers who have an unpaid debt to feel like they have to “finish” the job and pursue it until it is settled.
However, you have to ask yourself whether it is really worth it for your business to keep pursuing the debt. This can be illustrated with a simple example.
Dave is a busy plumber who gets a lot of work fixing problems with inner city apartment blocks and offices. Due to the demand, he often finds he has to turn away work. Because of his reputation for high quality and quick work, Dave’s charge out rate is $100 per hour for corporate clients.
Dave also has an unpaid bill from an office client worth $200. So far, he has spent a total of about two hours unsuccessfully trying to make contact with the client to settle the bill.
In Dave’s situation, it may not be worth him spending more time chasing the unpaid invoice. That’s because by spending time in the office and turning away other work, he is sacrificing $100 per hour in new fees. In addition, he has already “spent” two hours not working, which works out to $200 of unclaimed work. If Dave spends any additional time trying to have the bill paid, the costs will outweigh the benefit.
Who Can be Sued?
In Queensland, a debt recovery action can be brought against a number of parties. A creditor with an unpaid bill can sue an individual, sole trader, a partnership, a company or any other incorporated association.
If you are unsure of the business name that the person or entity is trading under, you can search their trading name on the Australian Business Register, or using the ASIC Organisation and Business Names Register.
Queensland Civil and Administrative Tribunal
The Queensland Civil and Administrative Tribunal (QCAT) is the venue where small claims up to the value of $25,000 cab be pursued within the legal system. Amounts larger than this must be pursued through the Magistrates Court.
QCAT can hear matters relating to a range of debt disputes, which most commonly has to do with unpaid bills or invoices for goods and services. QCAT can also rule on unpaid rent for commercial tenants, unpaid loans, wages that are owed to employees or contractors and invalid and dishonoured cheques.
What Are the Costs?
Applying for a judgement through QCAT will incur a court fee of between $290 and $590. The amount varies depending on the amount of the claim, with the highest fee of $590 being applied to claims seeking $10,000 or more.
In cases of financial hardship, the Tribunal has the discretion to waive the fee. In addition, in some instances, the fee might be recoverable or payable by the other party if your application is successful.
What Can Happen?
Before a QCAT hearing can take place, parties retain the option of settling the matter out of court. In many instances, this is exactly what happens, as parties seek to avoid the time and expense of formal proceedings.
QCAT hearings that proceed and are successful for the applicant typically result in enforcement orders. These orders bind the applicant and respondent, and place a court imposed legal order to settle the payment of outstanding money, and any other amount the Tribunal deems appropriate.
If you would like to learn more about a how the experienced local team at Challenge Collections can help you recover your unpaid debts with as little hassle or disruption to you as possible, please give us a call on (07) 3808 7001. Alternatively, you can send us an email or get in contact through the convenient form right here on the website. We look forward to helping you.