The Law Handbook 2024

Chapter 5.2: Are you in debt? 347 information about unconscionable conduct). This entitled the debtor to be repaid $5000 that she had paid to the debt collector using her credit card to settle the debt. At the time of accepting the $5000, the debt collector knew or at least suspected that the debtor was ignorant of the limitation period, impecunious and suffering from emotional difficulties. Collection House, one of Australia’s largest consumer debt collection agencies, later stated in a media release that it and its subsidiary Lion Finance would no longer pursue collection of statute-barred debts. If your debt is statute barred, it is recommended that you write to the creditor and request that they stop contacting you for payment because the debt is statute barred. In any letter to the creditor on this basis, it is vital to include a sentence such as, ‘I deny that I am liable for the amount demanded’. If judgment has been entered against you, the relevant time limit is 15 years, not six years, from the date of judgment. That is, after 15 years a creditor cannot bring a new action on a judgment (e.g. some bankruptcy proceedings), but can still commence proceedings enforcing that judgment debt (e.g. a warrant of seizure and sale), although in the latter case the court’s consent may be required before the creditor can take action (see Dennehy v Reasonable Endeavours Pty Ltd [2003] FCAFC 158). If you have given a mortgage for payment of the debt (e.g. over a house or a car), the relevant time limit is 15 years from the date of the end of the term of the mortgage. However, the LOA Act states that this time period only relates to the recovery of the principal lent by the creditor, not the interest. It is likely that action for interest on a mortgage must be brought within six years. Your rights and options You have a number of options, as set out below, but in exercising them, you need to give careful attention to the terms of any offer or agreement that you make or sign. If you require assistance then you should contact a community legal service or a similar service (see ‘Services that can help’, below). 1 Offer to repay in instalments If you can afford it, one option is to contact the creditor and attempt to negotiate repayment of the debt by instalments. Contacting the creditor When dealing with the creditor, it is recommended that you keep detailed notes of any conversations you have with them, including the date and time of the contact, and the name of the person spoken to. It is even better to confirm your conversations in writing to the creditor, keeping a copy of all correspondence. Try to get an undertaking (in writing if possible) from the creditor that while negotiations are on foot, they will not initiate legal action or place a default listing on your credit report. Making an offer to the creditor If you make an offer to the creditor to repay the debt by instalments, it often speeds up the negotiation process if you can include with your written offer a statement of your financial position. This state- ment should support the offer you are making and show that even if the creditor sued you, they would not get more money from you. Offers should state that they are made on a ‘without prejudice’ basis, which means that they cannot be used against you if court action follows. 2 Seek a variation of your repayment obligations If you have a loan regulated by the NCC and you have fallen behind in your repayments due to a change of circumstances (for instance, you may have lost your job or suffered illness), you may be able to apply to the creditor for a variationof your loan contract on grounds of hardship. Such a variation might take the form of payments being deferred for a few months while you get back on your feet, or the creditor accepting lower repayments during this time. The request for variation should be made in writing. For a discussion of hardship variation applications under the NCC, see ‘Financial hardship’ in Chapter 5.8: Mortgages, consumer leases and other finance products. For more advice, contact the National Debt Helpline on 1800 007 007. 3 Offer a lump sum If you have sufficient savings, another option is to contact the creditor and negotiate final settlement of the debt by offering a lump sum less than the debt amount. Many creditors will accept a reduced lump sum to finally settle a debt.