| Any creditor faced with the prospect of recovering money from a debtor is likely to ask how much it is going to cost them to try to recover it. That is not an easy question to answer.
Debt Recovery Agents - Commercial Agents - Debt Collectors etc usually charge a commission on what they recover for you as the client. Usually these costs are not recoverable from the debtor and as such, you get less back from the proceeds if they are recovered.
If you have a debt of $100.00 due to you and you retain me to collect it, then I will charge a commission of around 20%. I collect the debt, you get back you $80.00 and I get my $20.00.
If I have sued the debtor on your behalf, at the conclusion of any court action if you succeed, you will usually be entitled to recover an amount towards your legal costs from the unsuccessful party. The legal costs which are recoverable are the judicial expenses allowed by the court and the court has discretion as to whom, on what basis and to what extent expenses are to be paid.
The general rule, however, is that expenses follow success. The level of judicial expenses recoverable will vary depending on the stage which the court action has reached and the amount of procedure that has been necessary to reach that stage.
The reality is that the judicial expenses awarded by the court will rarely cover the solicitor's entire fee but will usually amount to a percentage of that fee (usually slightly more than half of the amount you have paid, about 66% at best) . The legal costs that are recoverable are only the proper expenses of the legal process itself, set in what is termed as Statutory Costs; these are set forward usually in the regulations which accompany the relevant Courts Act (for example in Queensland, The Supreme Court of Queensland Act).
Any costs incurred before court action is raised (with certain exceptions) are extra-judicial expenses and are usually not recoverable. The only real way you can ensure that you are not out of pocket, is through an agreement which precedes the provision of the money, goods or services, which is usually referred to as a "Credit Agreement", "Loan Agreement", "Bill of Sale" or similar.
The agreement does not need be large or fancy containing many pages. It does need to clearly set out the terms to which the parties have agreed and comply with any necessary laws (for example the Bills of Sale legislation) and should include a term enabling the recovery of the expenses associated with lawyers costs or debt recovery agents fees, such as the following. |
