The Law Handbook 2024

348 Section 5: Managing your money Refer to ‘1 Offer to repay in instalments’, above, for what you should do when contacting a creditor and when making an offer. 4 Request debt be waived If you have neither assets nor the income capable of paying the debt, another option is to contact the creditor, outlining your circumstances and pointing out that any action taken against you would have no effect. On this basis, you could request that the debt be waived. Again, sending the creditor a statement of your financial position may speed up the process. Refer to ‘1 Offer to repay in instalments’, above, for what you should do when contacting a creditor. If the creditor agrees to release you from the debt, it is vital that you obtain written confirmation of this. In the confirmation, advice from the creditor that the debt has been ‘written-off’ is not sufficient. The written confirmation should state that you have been released from the debt, and the best protection is to have the settlement written up in a ‘deed’. Contact a financial counsellor for further advice. For contact details, see Chapter 5.4: Financial counselling services. 5 Wait to be sued A fifth option is to do nothing and run the risk of being sued. If you have neither assets nor the income to pay the debt, this may not affect you in practical terms anyway. However, if judgment is entered against you in a court, it will be listed on your credit report for five years and the creditor can take steps to enforce the judgment indefinitely (subject to obtaining the court’s permission in some circumstances). Your chances of getting credit in the next five years from the date of judgment will be severely diminished. Also, if you come into either assets or income after judgment debt is entered against you, they may be at risk of enforcement action by the creditor. 6 File for bankruptcy A sixth option is to file for bankruptcy or to enter into a formal arrangement under the Bankruptcy Act 1966 (Cth) (‘ Bankruptcy Act ’). See Chapter 5.3: Understanding bankruptcy, for more information about bankruptcy and agreements under Part IX (debt agreements) and Part X (personal insolvency agreements) of the Bankruptcy Act. See also the Australian Financial Security Authority’s website (www.afsa.gov.au) . Before contemplating bankruptcy, you should discuss your circumstances with a financial counsellor. (For the contact details of financial counsellors, see Chapter 5.4: Financial counselling services). 7 Get help If you are not sure what to do, you can contact the National Debt Helpline on 1800 007 007 to discuss your rights and options. If you would like assistance in both determining your options and negotiating with the creditor, contact a free government-funded financial counsellor in your area. (See Chapter 5.4: Financial counselling services.) If you are sued Creditor seeks a court order If you have not paid a debt or come to a satisfactory arrangement after a creditor has requested payment from you, the creditor might sue you to force you to pay the debt. This means the creditor seeks a court order (known as a judgment) that you owe the debt. Jurisdiction The court in which the creditor sues you depends on how much the creditor is claiming from you. The ‘jurisdiction’ of a court is based on the maximum sum that the court can award in an action. The jurisdiction for debts is as follows: • Magistrates’ Court: up to $100000; and • County Court and Supreme Court: unlimited. Therefore, if the amount of the alleged debt is $100000 or less, the creditor will issue a complaint in the Magistrates’ Court. If it is over $100000, the creditor has a choice between the County Court and the Supreme Court in issuing a writ. NOTE As most consumer debts are less than $100000, this chapter concentrates on procedures in the Magistrates’ Court. However, similar procedures exist in most instances in the County Court and the Supreme Court.