Legal Considerations for Debt Recovery at EOFY

1. Statute of Limitations

In most Australian states, you have 6 years from the date a debt becomes due (or last acknowledged) to commence legal action. Once this period expires, recovery becomes near impossible through the courts.

EOFY tip: Review all aged debts. If a debt is approaching the EOFY deadline, take formal steps such as issuing a letter of demand or filing proceedings before time runs out.

2. Personal Property Securities Register (PPSR)

If your business registers security interests on the PPSR, EOFY is a critical time to ascertain:

• Validity (i.e., not expired),
• Accuracy (reflecting debtor’s details),
• Secured collateral is properly described.

Failure to maintain or renew PPSR registrations could cost you priority in insolvency scenarios.

3. Check the strength of your contracts

A legally sound contract is your first line of defence when debts become contentious. Do your contracts:

• Clearly define payment terms?
• Include enforceable late payment interest?
• Provide for recovery of legal costs?
• Contain personal guarantees?

EOFY is an ideal time to review and update all contracts.

4. Prepare for Legal Action Where Needed

If negotiation and reminders have failed, legal action may be your next step. Our team of experts can assist by:

• Issuing a compliant letter of demand or a statutory demand,
• Support demands by relevant evidence (contracts, invoices, communications),
• Ensure the right legal entity is being pursued,
• Ensure the right claim is being pursued.

Appropriate legal action and guidance can dramatically shorten the recovery timeline and preserve your rights.

5. Know the Boundaries of Third-Party Collectors

Debt collection agencies must comply with ACCC and ASIC guidelines on fair collection practices and if the debt collection agency breaches these guidelines, you could be liable. Click and Collect Debt is an incorporated legal practice and ensures all legislation and guidelines are complied with at the highest standard.

Legal Risk Management

Debt recovery at EOFY isn’t just a numbers game, it’s a legal risk management exercise. Ensuring your contracts are enforceable, your claims are within time, and your securities are valid can make the difference between successful recovery and a write-off.

If you need help reviewing your debt recovery processes or assessing the legal viability of outstanding claims, our team can assist.