Key points
- Start with clear reminders, then a formal letter of demand. Many debts are paid at this stage.
- The Magistrates’ Court hears civil claims up to $100,000. Larger claims go to higher courts.
- A statutory demand can be used against a company debtor in some cases, but it’s a serious step with strict rules.
- Time limits apply. For most contract debts in Victoria, you have 6 years to start a claim.
1. Check your paperwork
Gather the contract or terms and conditions, quotes, purchase orders, invoices, delivery records and correspondence. Make sure you know exactly who owes the money, whether it’s an individual, a partnership or a company (check the ABN and ACN), and that the amount is correct.
2. Reminders and a payment plan
Many late payments are about cash flow, not refusal. A friendly reminder, followed by a firmer one, often works. If the customer is struggling, consider a written payment plan. It’s often better to be paid over time than not at all.
3. Letter of demand
A letter of demand sets out the amount owed, how it’s calculated, a deadline for payment, and what you’ll do if it isn’t paid. A letter from a lawyer often prompts payment. It also shows the court you gave the debtor a fair chance to pay.
4. Statutory demand (companies only)
If the debtor is a company and the debt isn’t genuinely disputed, a creditor’s statutory demand under the Corporations Act 2001 (Cth) requires payment within 21 days. If the company doesn’t pay or apply to set it aside, it’s presumed insolvent, which can lead to liquidation. Statutory demands have strict technical requirements and aren’t appropriate for disputed debts, so get advice first.
5. Starting a claim
- Magistrates’ Court of Victoria: hears civil claims up to $100,000. Before filing, you’re expected to try to resolve the dispute, and you must file certifications about your claim.
- VCAT: can hear some consumer, trader and domestic building disputes.
- County Court and Supreme Court: for larger claims.
The Dispute Settlement Centre of Victoria offers free mediation that can resolve some disputes without a court hearing.
6. Enforcing a judgment
Winning a judgment doesn’t always mean you’re paid. If the debtor still doesn’t pay, enforcement options can include seizing and selling property, garnishing wages or bank accounts, or bankruptcy or winding-up proceedings.
Prevent future problems
Clear terms and conditions, credit applications with personal guarantees for company customers, and prompt invoicing all reduce the risk of bad debts.
How we can help
Asher Freeman Lawyers helps businesses across Victoria recover debts and resolve business disputes, from letters of demand to court proceedings and enforcement, with a focus on cost-effective outcomes.
Frequently asked questions
How long do I have to recover a debt in Victoria?
For most contract debts, 6 years from when the debt became payable. Don't leave it that long, as debts get harder to recover over time.
What's the Magistrates' Court limit for civil claims?
The Magistrates' Court of Victoria hears civil claims up to $100,000.
Can I use a statutory demand for any debt?
No. It's only for debts owed by companies, and it isn't appropriate where the debt is genuinely disputed. Get advice first.
Is a letter of demand from a lawyer worth it?
Often, yes. Many debts are paid after a formal letter of demand, which also helps if you later go to court.
This article is general information about Victorian and Australian law as at 10 October 2026. It is not legal advice. Contact us for advice about your situation.
