A letter of demand is a highly effective tool. In commercial collections, a significant proportion of overdue accounts are resolved within the demand period — typically seven to fourteen days — without any further action. But not all of them. When a debtor ignores a demand, the question is: what next?
Confirm the demand was received
Before escalating, confirm that the demand reached the right person. Registered post with acknowledgement, or email with a read receipt, provides evidence of receipt. A demand that was never received — or went to the wrong address — is a procedural gap, not a refusal. Resending to the correct address, or to a director personally, often produces a different result.
Follow-up contact
A demand letter is most effective when it is followed by direct phone contact within a few days of the deadline passing. Many debtors who do not respond in writing will speak on the phone — and a conversation that establishes whether there is a payment issue, a dispute or simple avoidance is far more useful than silence. This follow-up call should be made by someone with the authority to agree a payment arrangement on the spot.
The escalation path
If the demand is ignored and follow-up contact produces nothing, the options escalate in roughly this order. A second, firmer demand — ideally from a recovery firm or solicitor — changes the dynamic. Contact from a third party signals that the matter has moved beyond internal collection. Many debtors who ignored the original creditor's demand respond to a professional recovery firm's letter.
If the debt is undisputed and the amount justifies the cost, the next escalation is legal proceedings. In most Australian states, claims up to $100,000 can be brought in the relevant civil claims tribunal or Magistrates Court. Small claims divisions handle matters up to $20,000 at relatively low cost and without the need for legal representation in some jurisdictions.
Default judgments
Where proceedings are commenced and the debtor does not file a defence within the required time, a default judgment can be obtained. A judgment is a court order establishing the debt — it can then be enforced by garnishing the debtor's bank account, registering against property, or issuing a bankruptcy or winding-up notice.
When legal action is not commercial
Not every ignored demand warrants court proceedings. A judgment against a debtor with no assets or income produces a piece of paper, not cash. Before proceeding, assess what the debtor has: employment, property, a trading business, bank accounts. If there is nothing to enforce against, legal action costs money and recovers nothing.
Professional recovery firms assess enforceability as part of the escalation decision. Refer your account to Merion and we will advise on the most commercially sensible path.