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  • Kirtan Swamy

HOW TO: recover a debt in Victoria

Updated: Apr 18

What is a debt?


A debt is an unpaid amount of money owed from a person, people or entity to another person, people or entity. The party who owes the money is known as the debtor, and the party to whom the money is owed is known as the creditor.


Debt recovery is the process of recovering the debt. In Victoria, there are multiple ways of recovering a debt.


Letters of demand


The first step in recovering the debt is to send the other party a letter of demand. This process usually involves engaging a legal representative or a debt collection agency. 


A letter of demand should outline the following:


  • the client for whom you act;

  • the relevant relationship between the creditor and the debtor;

  • a description of the goods, services or transactions provided by the creditor to the debtor that gave rise to the debt;

  • the amount that is unpaid;

  • the steps that the creditor has taken so far to recover the amount; and

  • the demand, i.e. the final date by which payment is due and any other conditions.


Legal action


If a debtor does not respond favourably to the letter of demand or refuses to make the payment, the creditor can initiate legal proceedings in a tribunal or court. The course of legal action depends upon the amount of money that is owed. The legal avenues available for recovering the debt in Victoria are:


  • Victorian Civil and Administrative Tribunal (VCAT);

  • Magistrates’ Court;

  • County Court; or 

  • Supreme Court of Victoria.   




VCAT has the power to deal with disputes or claims that arise due to goods or services. VCAT has the power to:


  • refer a dispute to a mediator appointed by VCAT;

  • order one party to pay a sum of money to the other party;

  • order the refund of any money paid under a contract; or

  • declare whether a debt is owning or not.


If your claim is worth less than $15,000, you are generally not allowed to have representation. However, you may have an automatic right to be represented in certain cases, and if the other party is represented, you also have the option to be represented.


VCAT fees are generally lower than other court fees and include application, hearing, and other related fees. You may be eligible for fee relief if you have financial hardship, however, this is not applicable to businesses or companies.


VCAT generally does not award any orders for legal costs, except in exceptional circumstances.




Determining the correct court for your debt recovery will depend on the value of the debt. If the claim is up to the value of $100,000, the claim will be heard at the Magistrates’ Court.


If the claim is higher than $100,000, the matter will be heard at the Commercial Division at the County Court or at the Commercial Court at the Supreme Court, depending on the complexity of the legal matter. The County and Supreme Courts have a complex debt recovery process where the filing and hearing fees can be significantly high compared to VCAT.


The courts have powers over all commercial disputes and dealings with any type of civil debt claim. Nevertheless, the court process is complex compared to VCAT and legal representation is recommended to help navigate through the process.


If the debt recovery matter is determined by the Court, a Court can award legal costs in addition to any moneys owed in favour of the successful party.


Time limits  


If you are considering debt recovery, there is a limitation period of six (6) years for you to commence legal proceedings pursuant to the Limitation of Actions Act 1958 (Vic). This date is calculated at the last date payment was made by the debtor. After six (6) years a debt may become statute barred. So, it is important to try and deal with debt issues in a swift manner.


Do you have any money owed to you?

If you have tried to reach out to a debtor and have not had any success or are unsure if your debt is statute barred, you can contact a member of our commercial team on (03) 9311 8911.


The information contained in this article is general in nature and does not take into account your personal situation. This information should not be relied upon in place of appropriate professional advice. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice.



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