You have invoiced a customer in NSW, the due date has passed, follow-ups have gone unanswered, and the amount is now large enough that writing it off would hurt. You are not yet ready to hand the matter to a lawyer, but you want to know what the full path looks like — what you can do yourself, what a court will require, and what actually happens if a judgment does not produce payment.
By the end of the process, you will either hold money in your account, hold a court judgment that you can enforce against the debtor's wages, bank accounts, or property, or hold confirmation that the debtor cannot pay and you have a basis to write the debt off cleanly. One thing this process does not do on its own: it does not extract money from a debtor who genuinely has none. A judgment is a legal entitlement, not a deposit slip.
Prerequisites before you start
- A written record of the debt — the invoice, the contract or terms it was issued under, any purchase order or signed acceptance, and the payment terms.
- The debtor's correct legal name and address. For a company, the exact name and ACN as recorded on the ASIC register; for a sole trader, their personal name (the business name is not a legal entity).
- A ledger of what has been paid and what is outstanding, including any partial payments, credits, or disputes raised by the customer.
- A view on whether the debtor is solvent. There is no point spending several thousand dollars on enforcement against a company with no assets and no trading activity.
- An internal decision on your appetite for the relationship. Court proceedings end most commercial relationships; if you want the customer back, the preliminary steps below matter more than the legal ones.
- For larger debts, a sense of which court the amount falls within (covered in step 3), because the fees and procedural complexity scale sharply with the court.
The two prerequisites people skip are confirming the debtor's correct legal name and forming a realistic view of their solvency. Proceedings filed against the wrong entity get struck out and the fees are not refunded; judgments against insolvent shells are worth the paper they are printed on.
Steps to recover the debt
Make direct contact and try to negotiate
Before any letter, call the debtor. A surprising proportion of overdue commercial debt is the result of disputed invoices, lost paperwork, or temporary cashflow shortfalls that the debtor would prefer to resolve quietly. A phone call followed up by an email summarising what was agreed will resolve a meaningful share of overdue accounts at no cost.
If the debtor cannot pay immediately, a written instalment arrangement signed by both parties is enforceable as a contract and avoids the cost of court. Set deadlines, require payment by direct debit or bank transfer, and reserve the right to call up the full balance on default.
Issue a letter of demand
If informal contact fails, the next step is a formal letter of demand. The letter does not need to be drafted by a lawyer to be effective, although one on a law firm's letterhead tends to focus the debtor's attention. The letter should state:
- The exact amount owing and how it has been calculated.
- The invoice or contract the debt arises from.
- A deadline for payment — 7 to 14 days is standard.
- The consequences of non-payment, namely commencement of court proceedings and recovery of legal costs and interest where the contract allows.
Send the letter by a method that produces proof of delivery — email with read receipt where you have an active email address, and registered post to the debtor's registered office (for a company) or last known address (for an individual).
File a statement of claim in the right court
If the demand is ignored, the next step is to file a statement of claim in the court with jurisdiction over the amount. In NSW, money claims are heard in three tiers:
- NSW Local Court, Small Claims Division — claims up to $20,000. Procedure is informal, rules of evidence do not apply, and the matter is usually decided by a Magistrate or Assessor on the documents and short oral submissions. See Local Court of NSW — Civil Jurisdiction.
- NSW Local Court, General Division — claims over $20,000 and up to $100,000. Formal procedure, rules of evidence apply, contested hearings involve witnesses.
- District Court — claims over $100,000 and up to $750,000.
Claims are filed on the NSW Online Registry. The filing fee scales with the amount claimed and the court. The statement of claim must identify the parties correctly, plead the facts giving rise to the debt, and set out the amount claimed, any interest, and the costs sought.
Once filed and served, the debtor has 28 days to file a defence.
Obtain judgment
There are two paths from here. If the debtor files no defence within the 28-day window, you can apply for default judgment on the papers — no hearing, no further evidence, the court simply enters judgment for the amount claimed plus filing fees and any interest. This is the outcome in most undefended commercial debt matters.
If the debtor does file a defence, the matter proceeds to a hearing. You will need to produce the contract, the invoices, evidence of delivery or performance, and any correspondence about the debt. If you win, the court enters judgment for the amount it finds is owed.
Either way, what you now hold is a judgment debt — a court order requiring the debtor to pay. The judgment itself does not transfer any money. It gives you access to the enforcement options below.
Common stumbles at this stage:
- Suing the wrong entity. A trading name is not a legal person. Confirm whether you are dealing with a company (use the ACN), a sole trader, a partnership, or a trustee. Get this wrong and the proceedings collapse.
- Pleading the debt vaguely. "Money owed for services" without dates, amounts, and the underlying agreement invites a defence on the basis that the debt cannot be identified.
- Missing the limitation period. Most contract debts in NSW must be sued on within six years of the cause of action arising, under the Limitation Act 1969 (NSW). Wait too long and the debt is statute-barred.
Investigate the debtor before spending more on enforcement
You have 12 years from the date of judgment to enforce it under the Limitation Act 1969 (NSW), so there is rarely a need to rush into enforcement blind. Spend a few hundred dollars finding out what the debtor actually has before spending several thousand chasing assets that do not exist.
Useful searches:
- An ASIC company search for current officeholders, registered office, and any winding-up notices.
- A PPSR search for security interests over the debtor's assets — secured creditors rank ahead of you.
- A land title search via NSW Land Registry Services to see whether the debtor owns real property and what is registered against it.
- The National Personal Insolvency Index for individual debtors already in a bankruptcy or debt agreement.
You can also apply to the court for an examination notice or examination order, requiring the judgment debtor to answer questions on oath about their assets, income, and other debts. This is most useful when public records show little but you suspect the debtor has unrecorded assets or cash income.
Choose and execute an enforcement order
Once you know what the debtor has, you can apply for one or more enforcement orders. The main options are:
- Garnishee order on wages or bank accounts — the court directs an employer or bank to pay you directly out of money owed to, or held for, the debtor. Effective where the debtor has steady employment or known bank accounts.
- Writ for the levy of property — the Sheriff attends the debtor's premises and seizes goods, which are then sold to satisfy the judgment. Effective where the debtor has business equipment, stock, or vehicles of meaningful value.
- Writ for the possession of land — directs the Sheriff to take possession of the debtor's real property so it can be sold. Used for large judgments where the debtor owns land.
Each order is sought from the court that gave judgment, on the appropriate form, with a separate fee. Multiple enforcement attempts can run in sequence — if a garnishee order recovers nothing, you can move to a writ.
Common stumbles at this stage:
- Enforcing against the wrong bank account. Garnishee orders attach to the specific account named in the order. If the debtor has moved their banking, the order returns nothing and the fee is spent.
- Levying property the debtor does not own. Goods leased, on hire-purchase, or subject to a registered PPSR interest cannot be sold to satisfy your judgment. A PPSR search before issuing the writ avoids the cost of a fruitless Sheriff's attendance.
Escalate to bankruptcy or winding-up where the debt is large enough
Where the debtor is refusing to pay and you suspect they are insolvent, the final step is to use the insolvency regime to force payment.
For a company debtor with a debt of at least $4,000, you can serve a creditor's statutory demand under s 459E of the Corporations Act 2001 (Cth). The company has 21 days to pay, secure, or compound the debt, or to apply to set the demand aside. Non-compliance creates a presumption of insolvency, which you can use as the foundation of a winding-up application in the Federal Court or the Supreme Court.
For an individual debtor with a judgment debt of at least $10,000, you can apply for a bankruptcy notice and then a creditor's petition under the Bankruptcy Act 1966 (Cth), administered by the Australian Financial Security Authority. The threshold is set by the Bankruptcy Regulations 2021 and has applied since 1 January 2021. A creditor's petition based on a judgment debt must generally be presented within six years of the judgment.
Both routes are expensive and slow, and both are risky: if the debtor has no assets, you will pay the costs of the proceedings and recover nothing. The value of these steps is often less about recovery and more about closing the file with a documented act of insolvency that supports a bad-debt write-off.
Where Artificer Legal helps with NSW debt recovery
For straightforward small claims, a self-represented business owner can run the process from letter of demand through default judgment using the online registry. Where Artificer Legal adds value:
- Drafting letters of demand that are calibrated to the debtor and the underlying contract, so the threat is credible and the document does not undermine a later claim.
- Pleading statements of claim correctly, including the right party, the right cause of action, and properly particularised interest and costs.
- Running defended hearings in the General Division and District Court, including witness preparation and evidence.
- Drafting and serving statutory demands and bankruptcy notices, where a procedural defect (wrong amount, wrong service address, missing affidavit) hands the debtor a set-aside application.
- Sequencing enforcement against multiple asset classes — for example, a garnishee on wages followed by a writ for the levy of property — so the debtor's options narrow with each step.
- Advising on whether to stop spending. Often the most valuable advice is that the next step does not pay for itself, and the debt should be written off and used to tighten credit terms going forward.
The decision that determines whether you get paid
The single thing that determines whether a debt recovery action ends with money in your account is the assessment you make of the debtor's solvency before you file. A judgment against a debtor with assets and income is straightforward to enforce; a judgment against a debtor who has neither is a costly piece of paper. Spend the few hundred dollars on searches before you spend the few thousand on proceedings.
To recover a NSW business debt, work the cheap and informal steps first — direct contact, a written instalment arrangement, a letter of demand. If those fail, file a statement of claim in the court matched to the amount: Small Claims Division up to $20,000, General Division up to $100,000, District Court above that. Most undefended matters end in default judgment. Before you spend money on enforcement, search the debtor's company records, PPSR registrations, land holdings, and insolvency status. Then choose the enforcement order that targets the asset the debtor actually has — garnishee for income, writ for goods or land. Reserve statutory demands and bankruptcy proceedings for cases where the debt clears the $4,000 or $10,000 threshold and the debtor's refusal to pay looks more like insolvency than dispute.