A letter of demand is a formal, written request for payment. It is typically the last step before a creditor takes legal action. Ignoring one does not resolve the debt — it removes your opportunity to negotiate before the matter escalates.
The typical escalation path
- Letter of demand issued. The creditor (or their recovery agent) formally requests payment within a set timeframe — commonly 7 to 14 days. At this point you can pay in full, propose a payment arrangement, or raise a dispute.
- Pre-legal follow-up. If there is no response, further contact is made — by phone, email or post. The window for informal resolution narrows.
- Legal proceedings commenced. The creditor may file a claim in a court or tribunal. In Australia this could be QCAT (Queensland), VCAT (Victoria), NCAT (New South Wales) or ACAT (ACT), or a Magistrates or District Court, depending on the amount. Court filing fees are payable by the applicant but are commonly added to the judgment debt if the creditor succeeds.
- Default judgment entered. If you do not respond to the court claim, the creditor can apply for judgment in your absence. A default judgment is a court order that you owe the debt — and it can be obtained without any further notice to you.
- Enforcement. Once judgment is entered, enforcement options become available: garnishee orders (directing money from your bank account or wages), writs of execution against property, and examination hearings where you may be required to disclose your financial position to the court.
The cost of waiting
Legal costs — court filing fees, solicitor fees where applicable, and post-judgment interest — accumulate at every stage. A debt that could have been resolved by arrangement at the letter-of-demand stage often doubles or more by the time enforcement is reached.
Responding early keeps your options open
Even if you cannot pay in full, contacting Merion as soon as you receive a letter of demand gives you the best chance of agreeing a realistic plan, disputing any errors, or accessing hardship support — all before any legal step is taken.
If you are unsure what the letter means or what to do, free, independent advice is available from the National Debt Helpline on 1800 007 007.
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