Should you chase an unpaid debt through a debt collector or go straight to a lawyer? The answer depends on the size of the debt, whether it’s disputed, and how quickly you need results. This guide compares both options so you can make the right call for your business.

You’re owed money, and the debtor won’t pay. You’ve sent reminders, made calls, maybe even sent a stern email. Nothing. Now you’re weighing up your options: hire a debt collector or engage a law firm. It’s one of the most common decisions Australian business owners face—and it’s worth getting right, because the wrong choice costs you time, money, and sometimes both.

What each option actually does

A debt collector contacts your debtor by phone, letter, and email to pressure them into paying. They’re regulated under the Australian Consumer Law and the ACCC/ASIC Debt Collection Guideline (RG 96). They can’t provide legal advice, issue statutory demands, or commence court proceedings. If the debtor refuses to pay, the collector’s options run out.

A debt recovery lawyer does everything a collector can do—plus everything they can’t. That includes issuing a formal letter of demand, filing a statutory demand under s 459E of the Corporations Act 2001 (Cth), commencing court proceedings, and enforcing judgments through garnishee orders, writs of levy, or winding-up applications.

Side-by-side comparison

Feature	Debt Collector	Law Firm
Issue court proceedings	No	Yes — court action and enforcement
Issue statutory demands	No	Yes — s 459E Corporations Act
Provide legal advice	Prohibited by law	Yes — tailored strategy
Typical cost model	Commission (10–25% of amount recovered)	Fixed fee or no-win-no-fee
Recover costs from debtor	Generally no	Yes — court can order debtor to pay your costs
Best for	Small, undisputed debts (under $10,000)	Disputed, complex, or higher-value debts ($10,000+)
If debtor still won’t pay	Must refer to a lawyer	Can escalate directly to court proceedings

When a debt collector makes sense

Debt collectors can be a reasonable first step for straightforward, undisputed debts—typically under $4,000—where the debtor has simply forgotten or is disorganised rather than actively refusing to pay. The collector’s calls and letters are often enough to prompt payment.

The trade-off is cost structure. Most collectors charge commission—10–25% of the recovered amount. On a $5,000 debt, that’s $500–$1,250 out of your recovery. And if the collector fails, you’ve paid commission on nothing and still need a lawyer.

When you should go straight to a lawyer

For debts over $4,000, disputed amounts, or situations where the debtor is clearly avoiding payment, a specialist debt recovery lawyer is almost always the better option. Here’s why:

A lawyer’s letter of demand carries real weight—the debtor knows court action will follow if they ignore it. A collector’s demand doesn’t carry the same threat.
Statutory demands (for company debtors) can only be issued by or on behalf of a creditor with proper legal backing. A statutory demand gives the company 21 days to pay or face a presumption of insolvency—a powerful enforcement lever.
No-win-no-fee arrangements mean you don’t pay legal fees unless the debt is recovered. Unlike commission models, many law firms also recover their costs from the debtor—so the recovery comes back to you, not to your lawyer.
Full enforcement options including garnishee orders, writs for levy of property, and winding-up applications are only available through legal proceedings.

The hidden cost of starting with a collector

Here’s what most business owners don’t consider: if a debt collector can’t recover your money, you’ll end up at a lawyer anyway. By then, you’ve lost months waiting for the collector to exhaust their process, potentially paid commission on partial recoveries, and given the debtor time to dissipate assets or become further insolvent.

Going to a specialist debt recovery lawyer first doesn’t mean going to court first. A good lawyer will start with a letter of demand and negotiate before escalating. The difference is that if negotiation fails, they can escalate immediately—without the delay of changing providers.

How costs actually compare

Cost Factor	Debt Collector	Law Firm (No Win No Fee)
Upfront cost	Usually nil	Usually nil
Fee on $50,000 debt	$5,000–$12,500 (commission)	Fixed fee + costs recovered from debtor
If recovery fails	You’ve lost time + may owe fees	No fee owed
You keep	75–90% of recovered amount	Up to 100% (costs charged to debtor)

Key takeaways

✓ Debt collectors are suited to small, undisputed debts where a phone call or letter might be enough
✓ For debts over $4,000, disputed amounts, or unresponsive debtors, a specialist lawyer delivers better results
✓ Only lawyers can issue statutory demands, commence court proceedings, and enforce judgments
✓ No-win-no-fee law firms share the risk with you—and can recover costs from the debtor
✓ Starting with a collector when you need a lawyer wastes time and money
✓ A lawyer’s letter of demand is the strongest first step—it signals real consequences if the debtor doesn’t pay

Need help recovering a debt?

Call Hilton Bradley on 1300 240 319 for a free 15-minute consultation.

We’re specialist debt recovery lawyers with no-win-no-fee options across Sydney, Brisbane, and Melbourne.

Disclaimer: This article provides general information about debt recovery options under Australian law as at May 2026. Your situation may involve specific factors that affect how the law applies to you. For advice tailored to your circumstances, contact Hilton Bradley on 1300 240 319.