Reading time: 3 minutes

It’s an all too familiar scenario. A family uses a credit card to purchase life’s little luxuries – perhaps a new television or overseas holiday? Pretty soon, the credit card bill edges higher. Or perhaps a family run business has a month or two downturn and is suddenly unable to pay its creditors. Soon, you’re chased for payment. If you receive letters of demand, Statements of Claim or a Creditor’s Statutory Demand for payment, it is critical you respond promptly. Failure to do can see events take a definite turn for the worse if you ignore key legal documents. We set out below some case studies of what can happen if you bury your head in the sand, and choose to ignore your creditors.


The Sydney Morning Herald recently published a case study on a Melbourne family who were forcibly evicted from their house for failing to pay a $20,000 credit card bill. They stopped paying the minimum payments and started receiving letters of demand and other legal documents, which they chose to ignore. The credit card debt was sold to debt acquisition companies, who eventually pursued them via bankruptcy. The self-represented couple decided to appeal their bankruptcy and unfortunately lost. Throughout the appeal process, the trustee was incurring considerable legal costs. Suddenly the $20,000 credit card bill was now a total bill exceeding $290,000. And the couple lost their house. Ironically, had they acted before bankruptcy, they had the funds to pay their credit card bill.


If your company is served with a statutory demand, immediate action is required. A statutory demand is a formal, verified demand issued under the Corporations Act 2001. For example, a company receives a creditor’s statutory demand for payment of a debt exceeding $150,000, and a separate Statement of Claim for around $20,000. The Company’s business took a downturn towards the end of 2015. However, has since started rebuilding and employing more staff.

The Creditor’s Statutory Demand has expired. If a demand is issued and served and the company fails to pay the debt within 21 days from the date of service or fails to make arrangements to pay the debt, the company is presumed insolvent. The time frame is strictly enforced.

So, what can the Company do? At this point, their options are limited. There is a presumed insolvency, and now a creditor can use this to make an application to the Court to wind up the Company. Obviously, this is not great news for a Company having an upturn and regathering momentum.

Had they responded promptly to the statutory demand they could have sought to enter into a formal debt payment plan or have the statutory demand set aside through an application to the Court.

The Uptake

Both of these cases serve as a warning – unless you are an ostrich, burying your head in the sand and ignoring deadlines will be to your detriment. Swift action is needed to keep your options open. If you do receive court documents, you should seek immediate legal advice. Importantly, if you are unsure how to move forward, let LegalVision’s dispute resolution team know your questions by calling us on 1300 544 755 or by filling out the form on this page.


Trade Marks 101

Thursday 17 June | 11:00 - 11:45am

Your trade mark is one of the most valuable assets of your business. It is therefore crucial to understand how to protect your trade mark, avoid disputes, and prevent competitors from infringing on your rights.
Register Now

Expanding Your Australian Business into New Zealand

Thursday 24 June | 11:00am - 12:00pm

Looking to expand your business into New Zealand? Don’t get tripped up on common mistakes.
Register Now

Preventing Wage Underpayment in Your Business

Thursday 8 July | 11:00 - 11:45am

Learn how to identify and prevent wage underpayment in your business.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • 2020 Excellence in Technology & Innovation – Finalist – Australasian Law Awards 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice – Winner – Australasian Lawyer 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer