Debt Collection Letter

What is a debt collection letter?

A debt collection letter broadly refers to any letter which is a aimed at recovering an unpaid debt from another legal person (a company, ngo, government agencies or a natural person). Most of the time, someone trying to collect a debt will issue a reminder letter to the debtor before sending a letter of demand. Then, a final letter of demand will be sent. All of these types of letters can be referred to as debt collection letters. They are all important tools in the debt recovery process and as they represent different stages in the debt collection cycle intended at recovering money from debtors with different motives for not paying or different thresholds of acceptance for problems relating to the non-payment of debt.

What documents are not Debt Collection Letters?

Some documents commonly mistaken as debt collection letters are statements of claim, statutory demands, creditor’s petitions, bankruptcy notices and wind up orders. These documents are actualy different forms of legal proceedings which are related to the existence of a debt but are intended to have a very specific legal effect. For instance, a statement of claim is the first way in which a creditor will plead a debt. Typically if they have engaged in a contract or provided some goods and services to someone and these goods or services have not been paid for, the creditor will file a statement of claim as the first step in legal proceedings. A statement of claim is actually quite a simple document which details the cause of action which the plaintiff alledges and gives a few details and particulars of it.

Another legal document which is often confused with a debt collection document is a creditor’s statutory demand. This is a document issued under the Corporations Act 2001 (Cth) to a company which owes money to the creditor. If the company does not respond to the document within 21 days, and a court application is made, the company can be wound up in insolvency on the basis of a statutory presumption of insolvency. So it is important to understand that receiving a statutory demand is very different to receiving just another letter from the creditor. By sending you a document like this, the creditor is expressing an intention to have the company wound up.

Also, in relation to personal debt as opposed to company debt, a Bankruptcy Notice is often mistaken as simply another debt recovery letter. This is a mistake because a bankruptcy notice if the first step in a legal proceeding where the creditor is trying to make a debtor bankrupt. To do this, there must be an existing judgment debt and the creditor must attach this when filing the bankruptcy notice so that it can meet the requirements to be stamped by ITSA (Insolvency Trustee Service of Australia). After the period for compliance with a bankruptcy notice has passed, the creditor can then go ahead to issue a creditor’s petition which is when the creditor is making the first formal steps in forcing the debtor into bankrutpcy. So obviously a letter like this should not be ignored.

It is important to understand the impact of various documents as they arrive with you or at your business and in particular to distinguish between what a ‘ debt collection letter’ is and what actually consitutes something related to legal proceedings. If someone owes you money, we have debt collection letters available, just click on the link below.

Debt Collection Letter Resources

• Sample Debt Collection Letters Find a sample debt collection letter. Find out how to draft a debt collection letter.

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  Having unpaid debts can be a very painful experience, especially when you owe money to other people who you now cannot pay because you have not been paid yourself. However, happily the law protects us from non-payment in a variety of ways if you know the appropriate methods to enforce your rights. There are a number of things you can do if someone owes you money.