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Frequently Asked Questions?

Efficient debt collection requires that an appropriate balance to be struck between gentle persuasion and legal force!

 
 

A conventional debt collector is a licensed Commercial Agent who will usually charge fees and keep a portion of the debt collected as a commision inpayment for its work. debtcollect is an internet portal for Andrew R Ford, Solicitor performing debt collection services at greatly reduced rates. Commercial Agents are not permitted to pass their charges on to the debtor and so they generally take a percentage of what they collect for you. They have limited rights to appear in a Court and so they try and collect a debt by telephoning and writing to the debtor to pressure the money from the debtor. When the debtor refuses to pay, the Commercial Agent has little choice but to commence legal action and they usually do this through an associated law firm. This means you often end up paying both a commission to the Commercial Agent and huge fees to a Solicitor. Debtcollect allows you to by-pass the commercial agent and deal directly with the legal firm on a limited fee basis!

At debtcollect we work on the basis that you can do most of what the commercial agent would do for you. We presume that you will have telephoned or written to your debtor and demanded payment. A lawyer is permitted to pass most of their fees on to the debtor so that you pay very little of the costs of collecting the debt. Lawyers, of course, have full legal rights to appear in Court and use the force of the legal system to extract payment from unco-operative debtors. By funnelling matters in bulk to a legal firm, we can negotiate a low-cost legal regime which makes the use of a lawyer the most cost effective approach because our bulk numbers allow us to greatly reduces the size of a lawyer's legal charges and because lawyers are allowed by law to make the debtor pay those charges for you.

As a matter both of good business and common courtesy, you should first make polite contact with your debtor and remind them that the debt is overdue and enquire if there is some problem about them paying. They may have simply forgotten about it, they may be experiencing temporary financial difficulty or they may be dissatisfied with your product or service. If they are in financial difficulty, try and negotiate some regular repayment scheme so that each payment will confirm their continuing good faith and commitment to paying. If they are unhappy with your product or service obtain exact details of their dissatisfaction and do whatever would be reasonable to fix the problem.
Once it becomes clear that the debtor is not being serious (i.e. has unsubstantiated complaints about your product or is unlikely to make repayment in a time suitable to you) you should send them a polite, written ultimatum stating that unless payment is received by you by a specified date and time (usually around 14 days ahead), you will take legal action against them. For example, "......unless payment is received by us by 10.00am on 16th February, 2009, we will commence legal action against you."
If payment or a suitable settlement is not made by the date on which the ultimatum fall due, you should double check your facts relating to the debt, and then refer the matter to debtcollect for immediate legal action. Some people prefer to have us first send our "Final Demand" letter because of the psychological effect of the debtor receiving a demand from a solicitor. Be polite but always be firm and efficient with your debtors. Debtors are more likely to resist you if you have been rude to them. Conversley, they may try to take advantage of you if they sense vacillation, weakness or delay on your part. Some debtor's will play on your natural human sympathy and tell you stories of hardship. Some want to transfer their problems on to you. Empathise but remain firm.

Very few matters ever end up in a Court room. Only about 12% of legal actions to collect a debt are challenged by the debtor. If the debtor challenges your claim they must file with the Court a "Defence" form which sets out their argument. Our lawyers will then take certain initial action to clarify the dispute and try and settle it. Our lawyers charge a fixed legal fee for this work which may or may not be recovered, depending on the outcome of the case. They will liaise closely with you about the debtor's defence, explore with you the strengths or weaknesses of your position and advise you accordingly. Many of these matters will be settled before they go to a Court hearing. If the matter cannot be settled and a Court hearing is required our lawyers will charge you our special flat fee to prepare for that hearing, liaise closely with you and your witnesses (if any) and prepare detailed written statements of evidence for the Court. They will then attend Court and present your case for you and ask the Court to make an appropriate order for costs. You or your witnesses need not attend Court for debts of $10,000 or less.

While we would all like to be able to persuade our debtors to pay, legal action is the only method which can be used to force payment. New South Wales debt collection laws basically only allow two methods of enforcing a debt. We can either seize and sell the debtor's property or we can seize and appropriate the debtor's money. The seizure and sale of property is done through the N.S.W. Sheriff's Office using a Writ for the Levy of Property issued by the Court. The attendance of a sheriff's officer at the debtor's premises often causes them to pay in full or make arrangements through the court to pay by instalments. The sheriff's officer is required to allow the debtor at least 14 days in which to do this. If payment is not made to the sheriffs officer, goods can be seized and taken to be auctioned. The Court charges various fees for this, most of which are added to the debt. It is not unusual for the whole process to take around eight to twelve weeks. Unfortunately, the sheriff is often unable to make a seizure either because no-on ever seems to be at home, the debtor has absconded or the debtor has nothing worth selling.

The seizure of a debtor's money - either from his savings account, wages or from some other person who is holding the debtor's money - is done by issuing a document called a Garnishee Order. These are most often directed to the debtor's bank or employer and require money to be extracted from the debtor's bank account or wages and forwarded to the Court. It is not widely known that a garnishee order can also be directed to a person who owes money to the debtor. Thus, if your debtor cannot pay you because some other person won't pay him, you can garnishee that other person to have the debtor's money paid directly to you!

The problem with all this is that you need to know what goods the debtor has available for seizure or where he banks or works or who owes him money. If the debtor won't volunteer this information we can issue an Examination Order to have the debtor attend his nearest Court to be questioned about his financial affairs. While an examination summons is primarily designed to obtain information, the prospect of being "examined" by the Court often frightens a debtor into paying. A debtor who refuses to attend to be examined can be arrested and brought to Court by the sheriff if needs be.

Federal laws allow a debtor to be declared bankrupt. Bankruptcy laws are not strictly a method of collecting a debt. Rather, they are designed to bring relief to people who are "drowning" in a sea of debt. The Federal bankruptcy laws are far more lenient towards debtors than the State debt collection laws and so should be used only in special circumstances. The Federal Court also charges very high fees which act as a barrier to justice. The threat of bankruptcy, however, is often a useful tool to frighten debtors into paying but sometimes the reverse is true. result of actually proceeding to bankruptcy is that the debtor gets away without having to pay at all.

We don't live in a perfect world and, because of that, nobody can guarantee that a debt will be paid. Australian law also tends to be overly sympathetic to debtors.
The most common problem is that the debtor cannot be found. In a country as free and open as Australia, it can be very difficult to locate a person who does not want to be found. Our privacy laws actually protect debtors who wish to abscond and they provide no formal mechanism for locating them, even after you have a Court judgment against them. We can arrange "skip tracing" of a missing debtor for a fee and have private investigators try and locate the debtor for you. For ease and convenience, we will usually refer you directly to the skip tracer.

Some debtor's are just so broke that they simply cannot pay. They will often go into bankruptcy ("liquidation" for companies) to seek relief from their debts. When this happens the liquidator's fees are paid first, then secured creditors (such as banks holding mortgages) and, if there is anything left over, ordinary debtor's get paid. Bankruptcy often means "no payment". For this reason, we try to avoid bankruptcy and use it only where appropriate. If a debtor goes into bankruptcy (for an individual) or goes into adminstration or liquidation (for a company), they then become governed by Federal law. This overrides State debt collection laws. We are then required by the to cease all further action and you then have to hope and pray that the Federally appointed Bankruptcy trustee or company Liquidator is able to recover the money for you.

Some debtors will apply to the Court for permission to pay by instalments. There are no guidelines and very little authoritative law governing such applications. To make matters worse, the Courts give no special training or guidance to their officers about how to deal with such applications. As a result, some courts will allow debtors to repay a debt over a period of many years. While we have a right to challenge such orders, the realities are such that, in many circumstances, slow repayment may be the only realistic method of obtaining payment from a debtor who is genuinely "broke". To soften this blow, interest accrues on the debt while the repayments are being made. Court interest is simple reducible interest and is much lower than commerncial interest rates paid, for example, on overdraft accounts or credit cards.

The worst nightmare of a creditor is that the debtor will defend an action and win. In such circumstances the creditor will often be required to pay the debtor's costs. In actions for amounts of $10,000 or less, these costs are strictly limited to a few hundred dollars. We understand this concern on the part of creditors and will carefully weigh the risks of any defence and advise you appropriately before things have a chance of getting out of hand.

In a country as free and open as Australia, it can be very difficult to locate a person who does not want to be found. Our privacy laws actually protect debtors who wish to abscond and they provide no formal mechanism for locating a debtor, even after you have a Court judgment against them. If you refer a debt to us for collection and enter the word "unknown" in the field for the debtor's address, we will conduct a quick and simple search of our own databases to try and locate the debtor. If this does not solve the problem, we can arrange "skip tracing" of a missing debtor for a fee and have private investigators try and locate the debtor for you. For ease and convenience, we will often refer you directly to the skip tracing firm so that you can deal with them directly.

Most debts "expire" after six years if you have not commenced legal action. The six year period runs from the date the payment was due or from the last date on which the debtor performed some act which had the effect of confirming the debt. For example, if your original transaction with the debtor was in 2001 but he made a part payment to you in 2006 then the six years runs from 2006. Once legal action has been commenced we have 6 months in which to serve the documents on the debtor. From that date we then have nine months months in which to obtain a court judgment. Once a court judgment is obtained we have twelve years in which to collect the money. During all this time you are usually entitled to interest on the debt.

We only deal with claims where one of the parties resides or operates in, or where the events took place in, the State of N.S.W. This is because each state of Australia has its own peculiar legal system. Trying to cover each State and legal system introduces inefficiencies and expenses which would detract from our overall service. Some States have legal systems which are simply not cost effective to operate in. We do not accept matters where the debtor is outside of Australia.
We will accept all debts arising from contractual arrangements between parties plus claims for damages to property (car accidents, rental property, etc.). We will also deal with simple claims for personal injury arising from minor assaults. Because we are a high speed, high volume service we do not deal with personal injury cases arising from car accidents or with worker's compensation matters. We reserve the right to decline to accept instructions in any matter. We mainly do this because some matters are so complex or time consuming that they demand special attention and clog up our "production line".

Debtcollect has been structured so as to eliminate or substantially reduce many of the high operating costs of previous legal services. For that reason some of our practices might seem a little unusual to clients used to dealing with other solicitors or commercial agents.
We operate on the southern rural fringes of Sydney where the rents are ridiculously low (and where the air is clean and the people friendly). We require you to send the details of your debt to us over the internet so that they can be dumped directly into our computers. This reduces the need for expensive support staff. We require you to pay as you go so that we don't need to run a huge overdraft to finance your actions. We don't run a solicitor's trust account. This reduces our operating costs with the Law Society and means that we have to work on a "do it now!" basis. We run our cases through Campbelltown Court where both Local and District Court matters are deal with in the same place, where service delays tend to be lower than other courts and where civil sittings are all dealt with on the one day. This means we have less "down time" than with other courts.

Mark Vine spent the first 25 years of his career with the New South Wales Attorney General's Department, working in a wide range of Courts throughout the State. A self-confessed computer nut, Mark was seconded to draft the computer specifications for the N.S.W. District Court in the 1980s and was part of the training and systems review team for the N.S.W. Attorney Generals Department in the early 1990s. Mark was Chamber Magistrate at Sutherland and Liverpool Local Courts before being appointed Deputy Registrar and Chamber Magistrate at the Downing Centre Local Court (Civil Registry) in Sydney in 1995. An outspoken critic of current legal costs and procedure, Mark is an expert in civil court procedure and teaches lawyers in respect of debtcollection law and procedure through the auspices of the University of New South Wales. He left the Attorney General's Department in February, 2000 and helped create the debtcollect system which was launched on 1st October, 2000.

 

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