What to do when someone owes you money – a brief guide to letters of demand and debt recovery litigation

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Are you owed money?

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.

1. Send a letter of demand

This is the first step to undertake when ever you are owed money by someone, company, an individual, a charity or any other legal entity which can sue or be sued.  A letter of demand is a letter which states that the recipient owes you money and details all of the documentation which you rely on to support your claim for the money including unpaid invoices, unfulfilled contracts, evidence of the delivery of goods which have not been paid for and other similar documents.   The letter will then give a time frame for the recipient to comply and state that if this is not met within a defined period (normally 7 days) then you will take legal action without further notice and claim associated legal costs against the recipient including the costs of any subsequent bankruptcy proceedings.  The letter will also sometime include details of offers that you will accept as satisfaction for the debt like payment plans, a slightly reduced lump sum payment or even goods returned.  Often recipients of these letters will then pay for the amounts stated in the letter and there will be no need to pursue the matter any further.  Buy and send a debt collection letter right now! However, if you need to take the matter up another level, you need to proceed to step 2.

2.  Sue

If there is no adequate response from the person who owes you money after the letter of demand is sent out you can then institute legal proceedings.  In most jurisdictions this involves filing and serving a statement of claim.  You need appropriate legal advice on the drafting of the statement of claim and the jurisdiction in which it needs to be filed and you should speak to a lawyer about this to get further guidance.

3. Further litigation

If you obtain a judgment against the person who owes you money and they refuse to comply with it.  Then you have two options.  If they are a company you can seek that they be wound up in insolvency after you issue a creditor’s statutory demand and they fail to comply within 21 days.  Again, you need to seek proper legal advice about this.  If they are an individual you can seek to have them made bankrupt and their affairs placed in the hands of a Bankruptcy trustee.  To do this you need to file a creditor’s petition having obtained proper legal advice.  You can also look at other options fro enforcing a judgment which may include writs for the execution of property where the sheriff goes and repossess items of the defendant’s property and sells them to pay the debt back to you.


Dated: Jan 27 2010

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