If a creditor believes you owe money and you have not paid, chances are the creditor will want to recover the money and, in doing so, may serve you with a letter of demand or a court complaint. The biggest mistake you can make is to ignore it! Here are some effective tips on how to negotiate a settlement.

Understand the debt

If you have been served with a letter of demand, it is important that the letter contains details of:

the identity of the creditor,
the amount that is owed,
the due date for payment, and
an outline of the next steps in the event the debt remains unpaid.

If you do not recognise the information contained in the letter of demand, it is a good idea to request further information from the creditor. Any request should only include things that may ultimately be relied on in court. If you are unsure, seek legal advice as soon as possible.

Before negotiations begin

In order for settlement negotiations for a debt recovery matter to be successful, it is helpful to consider the other side’s interests. This will help drive a mutually satisfactory agreement that will benefit the overall position of both parties. Bear in mind that if the matter is unable to be resolved, legal proceedings may ensue as the alternative.

Generally speaking, the debtor’s objective is to pay as little of the debt as possible, while the creditor’s aim is to recover as much of the debt as possible, within a reasonable timeframe.

Even though the creditor might have a legal entitlement to be paid, the reality might be that the debtor is experiencing financial difficulty or hardship. Sometimes a creditor might decide that they are better off receiving some money than risk the debtor filing for bankruptcy, which could mean that the creditor ends up with nothing.

Plan for making a payment proposal

You should also carefully think about what payment arrangement is affordable. If you are in financial difficulty, you might consider obtaining advice from a financial counsellor or preparing a summary of your monthly take-home pay. It is important to review your priorities and liabilities and consider if paying off this debt will cause other financial commitments to be unable to be complied with. You should also ensure that the payment terms are realistic and achievable, or you could risk breaching your agreement with the creditor. Be mindful to allow some income left over to cover unforeseen expenses or in case of emergencies.

Once a decision is made on the total amount to be paid to settle the debt, then a written proposal should be submitted to the creditor for consideration.

The creditor will then decide whether to accept the payment proposal, write off part of the debt, make a counter-proposal or pursue the matter via debt recovery legal proceedings.

Record the agreement

Once a payment proposal is in place, the agreement should be recorded in writing. Sometimes parties don’t recall settlement negotiations in the same manner, especially if it is based on conversations. It is important to ensure the parties have an accurate record of the agreement before the parties commit to signing it.

How can Sharrock Pitman Legal help?

If you require assistance with a settlement negotiation or a proposed payment plan, we have lawyers who specialise in and can assist with debt recovery and commercial litigation. Contact our Commercial Litigation team on 1300 205 506 or by email at litigation@sharrockpitman.com.au.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by a member of our Legal Team

For further information contact

Caroline Callegari

Caroline Callegari is an Associate Principal and leads our Disputes & Litigation team. She has an advisory and advocacy practice in the following areas: Commercial Litigation, corporate and personal disputes, debt recovery and, insolvency and bankruptcy matters. Caroline can be contacted on (03) 8561 3324.

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If a creditor believes you owe money and you have not paid, chances are the creditor will want to recover the money and, in doing so, may serve you with a letter of demand or a court complaint. The biggest mistake you can make is to ignore it! Here are some effective tips on how to negotiate a settlement.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.

You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE:

(03) 8561 3318

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I owe someone money - how can I negotiate a settlement for a debt recovery matter?

Understand the debt

Before negotiations begin

Plan for making a payment proposal

Record the agreement