Served with a court claim for a business debt? How to use the 21 or 28 days

A court claim is the point where a creditor stops asking and starts proving. A supplier, an equipment lender, a former landlord or a collector has filed papers in a court, and now they’ve been served on you. That date of service is what matters. It starts a clock of 28 days in NSW and Queensland, and 21 days in Victoria, and in that time you choose to defend, admit or pay. Leave it, and the creditor can get judgment without a hearing.

This guide is mainly for sole traders, partners and directors who guaranteed a business debt. Companies get claims too, and most of what follows applies to them as well.

What exactly have I been served with?

The name on the document depends on the state and the court. In NSW it’s usually a statement of claim. In Victoria’s Magistrates’ Court it’s a complaint. In Queensland it’s a claim with a statement of claim attached. They all do the same job. They tell you who’s suing, how much they say you owe, and how long you have to respond.

That makes it different from the paper that probably came before it. A letter of demand is a creditor asking. A court claim has been filed with a court and carries a court-set deadline. It’s also different from a statutory demand, which goes only to companies and isn’t a court case at all.

Before doing anything else, find three things on the front page:

1. The court and the case number. You’ll need both to file anything.
2. The amount claimed, plus any interest and costs listed separately.
3. The date and method of service. If it was posted, the date of service may not be the day you opened it.

How long do I have? The clock, state by state

Where the claim was filed	What you were served	Time to respond	What happens if you don’t
NSW Local Court	Statement of claim	28 days from service	Creditor can apply for default judgment
Victoria, Magistrates’ Court	Complaint	21 days from service	Creditor can apply for a default order
Queensland, Magistrates Court	Claim and statement of claim	28 days from service	Creditor can request default judgment
Other states, territories and higher courts	Varies	Check the form you were served	Usually default judgment

The sources are the court and Legal Aid pages linked at the end of this guide. The form itself always states the time limit, so read it and trust it over any general table, including this one.

Two counting points catch people out. First, the clock runs from service, not from the date the creditor filed the claim. Legal Aid NSW notes that if the court posted the claim to you, you should ask the court what date it treats as the date of service. Second, the last day isn’t a good day to file. Aim to have your response in with a week to spare. Put the service date into the debt letter triage tool so the countdown sits in front of you.

Your three responses, and where each one leads

You don’t have to know the answer today. You do need to pick one of these before the deadline.

1. Defend: you don’t owe it, or not all of it

If the work wasn’t done, the goods were faulty, the amount is wrong or you’ve already paid part of it, you can file a defence. In NSW the defence says what you deny and why. In Victoria you file a notice of defence and serve a copy on the plaintiff within the 21 days. In Queensland you file a notice of intention to defend with a defence attached, also within the time limit.

A defence turns the claim into a real dispute, with steps, hearings and, often, costs. It’s the right road when the debt is genuinely wrong. It’s a poor road if you’re only using it to buy time on money you owe, because interest and the creditor’s legal costs keep growing. If you’re defending, talk to a lawyer or your local community legal centre early.

2. Admit and propose: you owe it but can’t pay it all now

NSW has a formal path for this. Legal Aid NSW explains that you can file an acknowledgment of the debt and, at the same time, an application to pay by instalments. A registrar checks your income, assets, expenses and other debts. The registrar decides whether your offer is realistic and whether it would clear the debt and interest within a reasonable time. The creditor can object, and if it does, there’s a short hearing.

Admitting means judgment is entered. But with an instalment order in place, Legal Aid NSW says the creditor can’t enforce while you keep up the payments. Miss one and enforcement can start again.

The informal version works in every state. Write to the creditor or its lawyers before the deadline with a specific offer: an amount, a date and a reason it’s realistic. If they agree, get it in writing. In NSW an agreed arrangement can be filed as a consent order.

3. Pay or settle: make the case go away

Paying the claim, or settling it for an agreed amount, ends the matter. Victoria’s Magistrates’ Court notes that if you pay the amount in the complaint, including costs, and the plaintiff accepts it in full, the case ends there. Settling before judgment means there’s no judgment to enforce and no judgment debt for a later bankruptcy notice or statutory demand.

This is where funding often comes in. Many creditors will accept a single, prompt lump sum for less than the full claim when the alternative is a long instalment order. Our page on funding a lump-sum creditor settlement shows how that works.

If you already know the debt is real and want to find out whether a payout is possible inside your deadline, start a 60-second enquiry. There’s no credit check to enquire.

What happens if I ignore it?

Doing nothing is the most expensive choice, because it hands the timing to the creditor.

• Default judgment, without a hearing. Once the time limit passes, the creditor can apply for judgment for the amount claimed, plus interest and costs. Nobody looks at whether the debt was right.
• Enforcement. A judgment creditor can use the court’s enforcement tools. Depending on the state, these include garnishee orders on wages or bank accounts, and orders allowing your property to be seized and sold.
• Escalation to insolvency. AFSA explains that a creditor with a final judgment against an individual can apply for a bankruptcy notice, which gives you 21 days to comply once served. For a company, the judgment debt can support a statutory demand, which can lead to a winding-up application.
• A harder road back. Setting aside a default judgment means a separate application. You generally have to explain why you didn’t respond and show you have a real defence. It can be done, but it costs more than responding on time.

Illustrative example: one claim, three possible weeks

Illustrative only. This is a composite, not a real client. A sole-trader landscaper in western Sydney falls behind with a plant-hire company over a wet winter. After two letters of demand, a statement of claim arrives by post. The claim includes the hire account, interest and the creditor’s filing costs. The landscaper rings the Local Court to confirm the service date and counts 28 days from there.

There’s no real defence. Most of the hire was used and invoiced correctly, although one invoice was double-charged. The landscaper’s options look like this:

• Admit and apply for instalments. Possible, but the instalments would run for well over a year, with interest, and there’s still a judgment on record.
• Write to the creditor’s lawyers. Point out the double charge and offer a reduced lump sum in 14 days, if funding comes through.
• Fund the lump sum. The business has steady invoices and clean bank statements, and the landscaper’s home has equity. That gives an unsecured option first and a property-secured fallback.

The lawyers accept the lump sum on the condition that it’s paid before the 28 days run out. Funding is arranged in time, the claim is discontinued and no judgment is entered. What made it work was the order: clock first, then the real figure, then the money. The landscaper made the call in week one, not week four.

That won’t always be how it goes. Funding takes as long as the security and documents take. That’s why starting early matters more than anything else in this guide.

Is borrowing to pay a court claim ever a bad idea?

Yes, and it’s worth being straight about when:

• When you genuinely don’t owe it. Defend it. Don’t fund a payout of a debt you dispute.
• When it’s one of many. If this claim is the visible tip of several overdue creditors, paying one may just move the queue. Look at the whole picture first. Our guide to several creditors chasing at once helps you rank them.
• When the business can’t carry the repayments. New debt only helps if the cash flow can service it. Otherwise a formal process may genuinely be the better path, and that’s a conversation worth having with an accountant or a registered insolvency practitioner.

When the debt is real, the business is still trading and there’s a sensible way to repay, funding can turn a court case into an ordinary loan. The options:

• Property-secured: first or second mortgages and caveat loans from $20,000 to $5,000,000, against residential or commercial property.
• Unsecured cash-flow funding: typically $5,000 to $500,000 for trading businesses, sized on turnover and bank statements.
• Consolidation: where the claim sits alongside ATO debt or supplier arrears, see business debt consolidation.

Any lender will look at the estimated total cost of finance against the claim plus the interest and costs you’d otherwise keep adding. Bad credit or an existing default is considered case by case, not ruled out.

A short checklist for tonight

1. Find the service date and count your 21 or 28 days. Write the deadline down.
2. Pull the account history: invoices, payments, emails and the letters of demand.
3. Decide honestly. Do you owe all of it, some of it or none of it?
4. If you dispute it, book legal advice this week.
5. If you owe it, work out what you could pay as a lump sum and what as instalments.
6. Ask about funding before you make the creditor an offer, so the offer is one you can keep.

A claim is a deadline, not a verdict. Let’s look at your way through it.

Being sued over a business debt feels final, but before judgment you still have real choices. You can settle, propose instalments or defend. A creditor holding a court claim often prefers a reliable payment now to months of enforcement. Our job is to find out whether we can help you make that payment, and how quickly it’s realistic.

The enquiry takes about 60 seconds and there’s no credit check when you first enquire. Your details won’t be passed around a pile of lenders, so your phone stays quiet. A real person reads what you’ve told us, looks at your situation and calls you.

Please fill in the form accurately. Include the amount claimed, the court, the service date, whether you dispute any of it, and any property you could offer as security. With those details we can tell you straight away whether funding fits inside your deadline, or whether something else should come first.

See if you qualify →