What happens if a debtor ignores a letter of demand?
A debtor ignoring your letter of demand is frustrating — but it's also common. Many debtors ignore a first demand hoping the creditor will give up. The ones that do are wrong. Here's exactly what your options are.
Step 1: Send a follow-up (Day 7–14)
Wait 7 days from your original demand date before following up. At this point, send a second, firmer letter referencing the original demand and escalating your language:
- Reference the original letter and its date
- State that no response has been received
- Set a shorter final deadline (typically 7 days)
- State explicitly that you will take legal action if payment is not received
If you sent via SydneyDebtCollection, our system sends a Day 7 and Day 14 reminder automatically.
Step 2: Assess the amount (Day 14–21)
The right escalation path depends primarily on the amount owed:
| Amount | Recommended path | Cost |
|---|---|---|
| Under $15,000 | NSW Civil and Administrative Tribunal (NCAT) or Local Court | Low filing fees |
| $15,001–$100,000 | Local Court (Small Claims Division) or debt recovery lawyer | Filing fee + legal costs |
| Over $100,000 | District Court or Supreme Court via solicitor | Significant legal costs |
| Any amount (company) | Statutory demand (wind-up threat) for debts ≥ $4,000 | Low cost, high pressure |
Option A: NCAT / Small Claims
For debts under $15,000, the NSW Civil and Administrative Tribunal (NCAT) is the lowest-friction path. No lawyers required, low filing fees, decisions are binding. The process takes 4–12 weeks on average.
Limitation: NCAT handles consumer disputes. For strictly B2B commercial debts, the Local Court's Small Claims Division (up to $20,000) is more appropriate.
Option B: Debt recovery lawyer (Day 21+)
For debts over $15,000, or if the debtor is disputing the claim, engaging a specialist debt recovery solicitor is usually the most cost-effective path. A lawyer can:
- Send a formal solicitor's letter (often triggers immediate payment)
- File a Statement of Claim in court
- Apply for a default judgment if the debtor doesn't respond
- Enforce the judgment (garnishee orders, writ of levy)
At Day 21, our system automatically identifies a suitable debt recovery lawyer from our partner network and presents you with a referral option. No upfront fees — the lawyer works on a contingency or agreed-fee basis.
Option C: Statutory demand (companies only)
If the debtor is a registered company and owes more than $4,000, you can serve a statutory demand under the Corporations Act 2001. The debtor has 21 days to pay or dispute. Failure to comply creates a presumption of insolvency — which gives you the right to apply to wind up the company.
This is a powerful tool but must be used carefully. A technical error in the demand can invalidate it entirely. Use a solicitor.
What about a debt collection agency?
Agencies are best suited to high-volume, lower-value debts (under $10,000). They work on commission (typically 15–30%) and use persistent contact campaigns. They cannot sue on your behalf — they can only persuade. Compare agencies vs. lawyers →