What should I do with a legal letter of demand?
A solicitor has written the letter on behalf of someone (the creditor) who claims you owe him or her money. The letter will usually state that unless you pay the amount claimed within a specified time (often 14 days), the solicitor has been instructed to begin legal proceedings against you.
If you do owe the money you should pay the debt as soon as possible to avoid having to pay extras such as Court costs and interest on the money.
If you can't pay the whole amount at once, you can offer to pay by instalments. Try to reach agreement with the person to whom you owe the money - your creditor. He or she is mainly interested in getting the money back and will usually only take legal proceedings if there is no other way of achieving this.
If you do not owe the money you can refuse to pay. If there is a clear reason (such as the money is for goods and services you didn't receive), tell the solicitor. It may prevent Court proceedings being started. However, if you're not sure whether you owe the money, you should get legal advice.
Remember, legal advice can always help. Even if you owe the money, a solicitor may be able to make better arrangements for you to repay it.
In situations where someone claims you owe them money, you will know if legal proceedings have begun against you because you will be served with a statement of claim.
Your creditor's solicitor will have already filed this document with a Court. Don't ignore it.
If you do owe the money it is still not too late to negotiate terms of agreement with the creditor. You can admit the debt and offer to pay by instalments through the Court office. But if you do this and the creditor objects to the terms you have offered within 14 days, the matter will be decided by the Court Registrar.
If you feel that you do not owe the money, you can choose to defend the claim. You can lodge the defence yourself or have your solicitor assist you to prepare and lodge it with the Court. A defence sets out your reasons for believing you do not owe the money.
You may also want to make a counter claim against the creditor - for example, you may have been sold defective goods by your creditor. If you want to defend the claim, the Court will set a date for the hearing. If you are served with a statement of claim and do nothing about it for 28 days, your creditor is then entitled to apply to the Registrar of the Court for judgment against you.
Reproduced from In Touch With The Law, published by the Law Society of NSW
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