If a customer owes your business money and has stopped paying, the cheapest recovery is almost always the earliest one. A letter of demand from a law firm resolves a large share of debts on its own, and costs a fraction of a court claim. If the debtor is a company and the debt is undisputed, a statutory demand escalates quickly. What you should not do is wait — debts get harder to recover the older they get. Call 1300 286 578.
Key takeaways
- A letter of demand is the cheapest first step, and it resolves many debts without anything further.
- Against a company, a statutory demand requires a debt of at least $4,000 and gives the debtor 21 days to pay or apply to set it aside.
- Against an individual, the equivalent is a bankruptcy notice, which requires a judgment debt of at least $10,000.
- Most simple contract debts must be sued on within six years, and the period varies by state.
- Paying a debt collector first, then a lawyer, usually costs more than going to a lawyer once.
What does a letter of demand cost?
We will give you an estimate before we start, and it is the cheapest step in any recovery. A letter of demand from a law firm does two things a reminder from your accounts team cannot: it signals that you are prepared to litigate, and it creates a documented demand that starts the clock on interest and costs where your contract allows for them.
Letter of demand, debt collector, or court?
They are not alternatives so much as a sequence, and the common mistake is starting in the wrong place.
A letter of demand is first. Cheap, fast, and often enough.
A debt collector works on volume and persistence. They can be effective on small, clearly undisputed debts. They have no power to commence proceedings, so if the debtor holds firm you end up instructing a lawyer anyway — having already paid a commission.
Court is where you go when the debtor can pay and won’t, or genuinely disputes the debt. It is the expensive option and the decision to start should be commercial, not emotional. We will tell you when a debt is not worth suing for.
Against a company there is a fourth option that sits between demand and court, and it is often the most effective of all.
What is a statutory demand?
A formal demand under the Corporations Act 2001 (Cth) requiring a company to pay a debt of at least $4,000 within 21 days. If the company does not pay, settle, or apply to set the demand aside within that period, it is presumed insolvent and you can apply to wind it up. That consequence is why statutory demands are so effective on undisputed debts.
The 21 days cannot be extended — a point the High Court settled — which puts real pressure on a debtor who has been ignoring invoices. The demand must be accompanied by an affidavit verifying the debt unless it is a judgment debt.
The important caveat: a statutory demand is the wrong tool where you know the debt is genuinely disputed. Issue one anyway and it will usually be set aside with costs against you. Read our guide to statutory demands before deciding.
What if the debtor is an individual, not a company?
Then the equivalent is a bankruptcy notice under the Bankruptcy Act 1966 (Cth), which requires a judgment debt of at least $10,000. The important difference is the word judgment: you generally need to have sued and won first, so the sequence is longer than it is against a company.
What if the debtor disputes the debt?
Then the fast routes close and it becomes a contractual argument. That is not necessarily bad news — many “disputes” are raised late and thinly, precisely to slow recovery, and they collapse under a properly particularised claim. What matters is that we identify a genuine dispute early, because pursuing the wrong process against a debtor who has one wastes money and hands them a costs argument.
How long does debt recovery take?
A letter of demand produces a response, or doesn’t, within a fortnight. A statutory demand runs on its 21-day clock. A defended court claim takes months and sometimes longer, depending on the court and the complexity. The variable that matters most is not the process — it is how long you waited before starting. Most simple contract debts must be sued on within six years, and that period differs between states, so old debts need checking before anything else.
Protecting yourself for next time
Most recovery problems are contract problems that surfaced late. The terms worth getting right before you extend credit: clear payment terms and what happens when they are missed, a right to charge interest and recover collection costs, security over goods until paid, and personal guarantees from directors where you are dealing with a small company. Getting those into your terms of trade is a small piece of work, and it changes what recovery looks like the next time.
We recover debts for businesses across Australia, from offices on the Gold Coast, in Brisbane, Sydney and Melbourne. Where a debtor is interstate, that is usually a procedural question rather than an obstacle. Related: statutory demands for creditors, insolvency and bankruptcy, construction payment disputes and when a client refuses to pay.
Debt recovery FAQs
How much does a letter of demand cost?
We give you an estimate before we start. Dispute work is charged at our standard rates and the cost depends on the debt and the debtor, so we scope it first rather than quote a number that turns out to be wrong.
Can I charge interest on an overdue invoice?
If your contract or terms of trade provide for it, generally yes. Without a contractual right, interest is usually only recoverable from the date proceedings start.
How long do I have to recover a debt?
Most simple contract debts must be sued on within six years, and the period varies between states. Old debts should be checked before you spend anything pursuing them.
Is a statutory demand the same as suing?
No. It is a formal demand with a statutory consequence — a presumption of insolvency — rather than a court claim. It is often faster and cheaper than suing.
What is the minimum debt for a statutory demand?
$4,000.
What if the company ignores my statutory demand?
After 21 days it is presumed insolvent and you can apply to wind it up. That presumption lasts three months.
Should I use a debt collector instead of a lawyer?
For small, clearly undisputed debts a collector can work. They cannot commence proceedings, so on anything contested you will end up with a lawyer regardless, having already paid a commission.
Can I recover my legal costs?
Sometimes, and it depends on your contract and the court. Terms of trade that expressly allow recovery of collection costs materially improve your position.
The debtor has gone into administration. Have I lost the debt?
Not necessarily. You become a creditor in the administration and there are steps worth taking quickly, including checking for any security or retention of title you hold.
Do you act on debts of any size?
We will tell you honestly when a debt is too small to be worth pursuing commercially, and what to do instead.
Get the debt moving
Send us the invoice and the contract and we will tell you what it will take to recover it, and what it will cost, before you commit. Call 1300 286 578 or get in touch.
Last updated: 2 October 2026
