Last updated 28 November 2016
When a person fails to pay a debt, or where there is a genuine dispute about whether a debt is owed and in what amount, the courts may determine whether the debt must be paid.
Court action can be time consuming and expensive. It is also possible to deal with debt problems or disputes through mediation or informal settlement discussions. Dispute Resolution Centres of Queensland offer free, confidential and voluntary mediation services.
Court proceedings for the recovery of a debt must be commenced within six years from the date when the debt first arose (s 10 Limitation of Actions Act 1974 (Qld)). If a written acknowledgement that a debt is owing has been given or part-payment of a debt has been made, this will extend the time limit for commencing court proceedings.
A debtor should not pay a debt that is more than six years old without first seeking legal advice.
The appropriate tribunal or court in which to bring proceedings will depend on the amount of the debt. For debts of $150 000 or less, proceedings may be brought in the Magistrates Court.
The Queensland Civil and Administrative Tribunal (QCAT) has jurisdiction to hear minor debt claims of up to $25 000. Tribunal procedures are simpler, cheaper and quicker than other civil court proceedings and are designed to be navigated without legal representation.
For debts of $150 000 to $750 000, proceedings may be brought in the District Court.
For debts of more than $750 000, proceedings may be brought in the Supreme Court (see The Court System chapter).
Tribunal and court proceedings to recover a debt
Court procedure in QCAT is governed by the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act) and the Queensland Civil and Administrative Tribunal Rules 2009 (Qld) (QCAT Rules). Court procedure in the civil courts is governed by the Uniform Civil Procedure Rules 1999 (Qld) (UCP Rules).
Although the forms and terminology differ slightly, the process for commencing a claim for a debt is similar in QCAT and the civil courts.
The process for commencing a claim in QCAT or the courts is demonstrated in the diagram below.
(Click image to see full size.)
Court and registry staff can provide copies of relevant forms and information about the filing fee.
Starting debt recovery proceedings in the tribunal or court
When a creditor commences proceedings to recover a debt, the QCAT application or court claim must include details about:
- when the debt was entered into
- who the parties to the debt are
- what the creditor provided in return for the debt
- what agreement there was about payment of the debt
- whether the agreement was written or verbal
- what the amount of the debt was
- what payments the creditor has received for the debt.
The QCAT application or court claim must be filed with the court registry, and then served upon the debtor. After a QCAT application or a court claim is served, a debtor has 28 days to respond. It is advisable to obtain legal advice within this 28-day period.
If the strict 28-day deadline passes and the debtor has not paid the money owing or filed a response, then the creditor can apply for a default judgment.
Unless the debtor agrees entirely with the creditor’s allegations about the amount of money owed (including costs and interest), it is essential that the debtor responds to the application or claim within 28 days of being served.
An informal agreement with a creditor to settle a debt does not safeguard the debtor against a default judgment. If a settlement is negotiated, it should be set out in writing and include a term that the creditor will immediately discontinue the court proceedings against the debtor.
The QCAT or court registry staff can provide the forms for making an application for default judgment. The creditor will provide a sworn statement about the debt and about service of the claim on the debtor. The application can be made without giving any notice to the debtor.
When a creditor makes an application for default judgment, an order can be made for immediate payment of the full amount of the claim, plus interest and costs. The debtor does not have to be present for this decision to be made. A debtor will be notified of the order in writing that a default judgment has been made by the court. If the debtor fails to pay the judgment amount within the time allowed in the order, the creditor can take action to enforce the judgment debt (see Recovering a Judgment Debt).
If a creditor obtains default judgment when the defendant has good reason for not filing a defence or after agreeing to alternative arrangements for payment of the debt, the debtor should immediately apply to have the judgment set aside (s 51 QCAT Act). Provided the defendant can satisfy the judge or tribunal member that the defendant has a good defence or that a private agreement for payment has been made and that the defendant has not defaulted on any obligations under the agreement, the default judgment would usually be set aside. If an agreement is made, the debtor should always keep a written record of the terms of the agreement and request receipts as proof of payment.