Collecting a debt
Should I send a letter of demand if I can't reach some other agreement?
Before starting a case in the Magistrates Court you should write a letter of demand to the other party saying there is a debt and that you want them to pay it.
You must write a letter of demand if you want to recover the costs of lodging the claim from the defendant if you end up going to court. Sometimes people send their demand by email or text message. If you do this, make sure you keep a copy of what you send. In all cases you will need to prove to the court that you let the other party know of your demand. Sending your letter by registered post is one way of having proof the other party was aware of your demand.
What should I put in a letter of demand?
You should get legal advice before sending your letter of demand.
The letter of demand should:
- prove the person owing the money knew the debt had to be paid, or give details of how the debt arose
- clearly set out the relevant dates, agreements and amounts
- include copies of quotes or invoices when applicable
- set a timetable for legal action unless a settlement proposal is received
- be sent by registered mail if possible and the signed postal receipt kept.
This gives the other party a chance to pay the debt without going to court.
You should keep copies of all the letters (texts or emails) you send to the other party.
What if I do not get any response, or an unfavourable response to the letter of demand, or they say they will pay and then don't?
In these cases you may need to start court proceedings. Taking a case to court should be a last resort.
You should always seek legal advice before going to court.
Do I have to accept an offer to pay by instalments?
You don't have to accept an offer to pay by instalments but in some cases it may be the easiest and fastest way to get your money.
- Negotiate with the debtor for payment in full.
- Take the case to court to get payment in full without instalments. Court fees are involved. Also if you get a judgment and then seek enforcement, if the debtor has no capacity to pay in full, the court may decide to let the debt be paid in instalments.
I have been offered a lesser amount to settle the debt now. Should I accept the offer?
Get legal advice on what is best in your situation.
Factors to consider include:
- whether you want to go to court
- whether you will get a better result at court
- how soon you want your money.
Sometimes if the case goes to a hearing at court the magistrate may decide the debtor owes you less than they have offered before court. For example, with a car accident, at a hearing the magistrate may find you contributed to the accident and the damage to your car, for example, by driving too fast, and not award all of your claim. The magistrate could also decide you are owed nothing.
Your case may not get listed for hearing soon and when it is, even if you are successful, the debtor's financial situation may have changed and they may not be able to pay.
- Sample letter of demand (for the cost of repairs after a car accident)
- Sample letter or demand (money owed).
Reviewed: 3 January 2020