Collecting a debt

If someone owes you money, your options to collect the money include:

Contacting the debtor and trying to reach an agreement through negotiation.
Sending a letter demanding payment.
Going to court.

Taking a case to court should be a last resort. You should get legal advice. You can find more information about where to get legal help on our webpage Get help with debt problems.

This page has information on sending a letter of demand, what to do if you don’t get a response or a favourable response after sending a letter of demand, your options if you receive an offer to pay by instalments, or an offer to settle for a lesser the amount.

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. You should keep copies of all the letters (texts or emails) you send to the other party. 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, or requesting email read receipts, are some ways 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 owed
include copies of quotes or invoices when applicable
set a timetable for legal action unless a settlement proposal is received, and
be sent by registered mail if possible and the signed postal receipt kept, or if sent by email, a read receipt.

This gives the other party a chance to pay the debt without going to court.

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.

If you don’t want to accept an offer to pay by instalments, you can:

negotiate with the debtor for payment in full, or
take the case to court to get payment in full. Court fees are involved, and 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, and
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 the magistrate may find you contributed to the accident and the damage to your car because you drove too fast, and not award all of your claim. The magistrate could also decide you are owed nothing.

It will usually take time for your case to get listed for hearing. Even if you are successful, the debtor's financial situation may have changed, and they may not be able to pay.

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Reviewed: 17 April 2024