Debtors refusing to pay up is not uncommon in business, and it can create some stressful situations. Here are some tips on how to chase up bad debts and recover what is owed to you.

The first step in recovering a debt is to send the debtor a letter of demand. A letter of demand is a formal letter which sets out a legal demand. The letter should include:

1.    The full details of the debt;

2.    The terms of the contract including interest and default clauses;

3.    Notice that, unless the debt is paid in full by a specified time, court action will be initiated to recover the debt without further notice to the debtor; and

4.    Payment details.

It is beneficial to have a letter of demand drafted by a lawyer, because people will often take a situation more seriously if legal action is involved. Receiving a letter from a lawyer may be the push a debtor needs if they have been refusing to pay so far.

If the debt is disputed, you can also make a claim to the Disputes Tribunal. A disputed debt means that the debtor believes they do not owe the debt. The Disputes Tribunal cannot be used to get a debtor to make a late payment.

The claim must be less than $30,000 to be heard by the Tribunal. If your claim is for slightly more than this, you can write part of a debt off to reduce the amount owed to $30,000, but you cannot split the debt and make several smaller claims.

You cannot have a lawyer represent you at the Tribunal, but a lawyer may help you draft your application and prepare evidence. The Tribunal is quicker and easier than going to Court, and will require less of an investment.

The Tribunal has an accessible online application process, as well as an in person option.  Once you have applied, the other side will be notified and a hearing date will be set. The Tribunal can make decisions that are enforceable by the District Court if the debtor still refuses to pay.

If the debt is more than $30,000, you can make a claim to the District or High Court. If the debt is less than $350,000, the District Court can settle the dispute. If the debt is greater than $350,000, the dispute must be settled in the High Court.

It is important to ensure that you remain diligent with your debtors as the Court process can be lengthy and require an investment of time and money. If you are confused about your options and need help, it pays to seek advice from a professional with experience in the area.


Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Alan Knowsley and Hunter Flanagan-Connors