What Happens If You Ignore a Letter of Demand in Australia?

You’ve received a letter of demand. You read it, felt your stomach drop, and now you’re wondering: what happens if I just ignore it?

Ignoring a letter of demand sets off a predictable escalation path that typically ends with a tribunal claim, a default judgment against you, and enforcement action that can affect your credit rating, bank accounts, and property.

What a letter of demand is

A letter of demand is a formal written notice that someone believes you owe them money or have breached an obligation. It sets out:

• The amount claimed or the action required
• The legal basis for the claim
• A deadline to respond or pay (typically 7–14 days)
• A warning that legal action will follow if you don’t comply

The letter is not a court order. You are not legally required to pay just because someone sent you a letter. But ignoring it has consequences.

The escalation path when you ignore a letter of demand

Step 1: The sender files a tribunal or court claim

If you ignore the letter and the deadline passes, the sender will typically file a claim in the relevant tribunal or court. Small claims go to the tribunal or court for the state:

• New South Wales: Local Court (Small Claims Division up to $20,000; General Division up to $100,000)
• Victoria: Victorian Civil and Administrative Tribunal (VCAT)
• Queensland: Queensland Civil and Administrative Tribunal (QCAT)
• Western Australia: Magistrates Court (minor case)
• South Australia: Magistrates Court (Minor Civil)
• Tasmania: Magistrates Court (minor civil claim up to $15,000)
• Australian Capital Territory: ACT Civil and Administrative Tribunal (ACAT)
• Northern Territory: Northern Territory Civil and Administrative Tribunal (NTCAT)

For claims above the tribunal threshold, the matter goes to the Magistrates Court or District Court.

Once filed, you will be served with the claim documents — typically by post or email.

Step 2: You are served with the claim

Service means you receive the tribunal application or statement of claim. This is your formal notice that legal proceedings have started.

You now have a strict deadline to file a response — typically 14 or 28 days depending on the jurisdiction. The claim documents will tell you:

• The hearing date (if set)
• How to file a defence or response
• What happens if you do nothing

Step 3: You ignore the claim

If you ignore the tribunal claim and don’t file a response, the tribunal or court can make a default judgment against you. This means:

• The claimant wins automatically
• You don’t get to tell your side of the story
• The tribunal orders you to pay the full amount claimed, plus costs and interest

A default judgment is a legally enforceable court order. It has the same force as if you went to a hearing and lost.

Step 4: Enforcement action begins

Once the claimant has a tribunal or court order, they can enforce it. Enforcement options typically include:

• Garnishee order: Money is taken directly from your wages or bank account
• Writ of execution: A sheriff seizes and sells your personal property
• Charge over property: A charge is registered against your home or land
• Examination summons: You are ordered to attend court and disclose your financial situation under oath

Enforcement action can continue for up to 12 years in most states.

Step 5: Credit default and long-term consequences

If the debt remains unpaid, the creditor may list a default on your credit file. This affects:

• Your ability to get a home loan, car loan, or credit card
• Your ability to rent a property (landlords check credit files)
• Your business reputation if you are a director or sole trader

A default typically stays on your credit file for five years, even if you eventually pay the debt.

What to do instead of ignoring the letter

1. Read the letter carefully

Identify:

• What they are claiming
• The legal basis for the claim
• The deadline to respond
• Whether the amount is correct

2. Check if the claim is valid

Ask yourself:

• Do I actually owe this money?
• Is the amount accurate?
• Was there a contract or agreement?
• Is the claim statute-barred (too old to enforce)?
• Is there a genuine dispute about the facts?

If the claim is wrong, you have grounds to dispute it. If the claim is partly right, you may be able to negotiate.

3. Respond in writing before the deadline

Even if you don’t agree with the claim, respond. A written response shows you are engaging and gives you time to prepare a proper defence. You can:

• Dispute the claim and explain why
• Request further information or evidence
• Propose a payment plan
• Make a counter-offer to settle

5. File a tribunal response if a claim is lodged

If the sender files a tribunal claim, you must file a formal response within the deadline. The response is called a “defence” or “respondent’s statement” depending on the jurisdiction.

Can you negotiate after ignoring the first letter?

Yes — but your negotiating position is weaker. Once a tribunal claim is filed, the sender has already paid the filing fee and invested time in the process. They are less likely to accept a low settlement offer.

If you ignored the letter of demand but want to settle before the hearing, you can:

• Make a written settlement offer
• Propose a payment plan
• Request mediation (most tribunals offer free or low-cost mediation)

If the other party accepts, you can formalise the agreement using a deed of settlement or payment plan agreement. Both parties sign, the tribunal claim is withdrawn, and the matter is resolved.

What if the letter of demand was never valid?

Some letters of demand are sent by people who have no legal basis for their claim. Common examples:

• A landlord claiming bond deductions that breach tenancy law
• A business claiming payment for services never agreed to
• A debt collector chasing a statute-barred debt
• A demand based on a contract that was never signed

If the demand is invalid, you should still respond. Ignoring it won’t stop the sender from filing a claim — it just means you won’t have a response on the record.

Your response should:

• State clearly that you dispute the claim
• Explain the legal basis for your dispute
• Cite the relevant statute if applicable
• Warn that you will defend any tribunal claim and seek costs

A properly drafted response puts your reasons for disputing an invalid claim on record.

How Claim Done helps you respond to a letter of demand

Claim Done’s Legal Response service generates a professionally formatted response to any letter of demand in about 5 minutes. Here’s how it works:

1. Upload the demand letter — scan or screenshot the letter you received
2. Answer a 5-minute intake form — tell us your side of the story and upload your evidence
3. Our Programmatic Algorithms draft your response — they draft a response citing the applicable Australian law
4. Review and send — you get a PDF you can review, print, and send yourself

No subscription. Done in about 5 minutes.

If a tribunal claim has already been filed, use Claim Done’s Tribunal Response / Defence Pack service to prepare your defence documents for filing.

Respond, don’t ignore

Ignoring a letter of demand sets off a predictable escalation path: tribunal claim, default judgment, enforcement action. The debt doesn’t disappear — it gets worse.

Responding costs less, takes less time, and gives you control over the outcome. Even if you don’t agree with the claim, a written response shows you are engaging and protects your legal position.

If you’ve received a letter of demand, start with Claim Done’s Legal Response service. Upload the letter, answer a short form, and get a professionally drafted response in about 5 minutes for $49.

Frequently Asked Questions

Can I be arrested for ignoring a letter of demand?

No. A letter of demand is a civil matter, not a criminal matter. You cannot be arrested or jailed for ignoring a letter of demand. However, if you ignore a tribunal order or court order, you can be held in contempt of court in extreme cases.

How long do I have to respond to a letter of demand?

Most letters of demand give you 7 to 14 days to respond. The deadline is set by the sender, not by law. However, if you ignore the letter and they file a tribunal claim, you will have a strict legal deadline (typically 14 or 28 days) to file a defence.

What happens if I can't afford to pay the amount demanded?

You should still respond to the letter. Explain your financial situation and propose a payment plan. Most creditors prefer a payment plan over tribunal proceedings. Claim Done’s Payment Plan Agreement service can formalise the arrangement in writing.

Can a letter of demand affect my credit rating?

No. A letter of demand itself does not appear on your credit file. However, if the sender obtains a tribunal or court judgment against you and the debt remains unpaid, they can list a default on your credit file. The default typically stays for five years.

What if the letter of demand is from a debt collector, not the original creditor?

Debt collectors must follow the same legal process as the original creditor. If the debt is valid, ignoring the letter has the same consequences. If the debt is disputed or statute-barred, you should respond in writing and state your position clearly.