The Law Handbook 2024

Chapter 5.2: Are you in debt? 351 interest and insurance charges, or is complicated, double check the amount or get an accountant, a financial counsellor or a legal adviser to check it. If you have any questions about the amount, send a letter asking the creditor to explain the areas of uncertainty (see ‘Your rights and options’, above, for what you should do when contacting a creditor). If this takes longer than 21 days, you should seek advice about lodging a notice of defence to give you time to check the amount properly. If you do lodge a notice of defence, seek legal advice immediately. Rule 13.05 of the Magistrates’ Court General Rules allows you to request further details (called ‘further particulars’) of the creditor’s claim. However, the request must be in writing and specify the details being sought. A solicitor can assist you in this. Offer of compromise If you acknowledge the debt but have a significant dispute as to the amount claimed, the appropriate course of action may be to lodge a defence and make an offer of compromise under order 26 of the Magistrates’ Court General Rules. An offer of compromise is a formal offer of settlement made to the creditor. It must be made in writing in accordance with rules 26.02–26.04 of the Magistrates’ Court General Rules. It must contain a statement to the effect that it is served in accordance with order 26. An offer of compromise must also state whether it is inclusive of costs or whether costs are to be paid or received in addition to the offer of compromise. If the creditor rejects the offer, the dispute will be heard by the court. If the court makes an order for an amount lower than the offer, standard costs incurred after the date of the offer must be paid by the creditor. The offer of compromise does not involve the payment of money unless and until the offer is accepted and the terms of the offer are agreed upon. You may potentially avoid liability for some of the costs of a hearing by making a prudent offer of payment to the creditor at the earliest opportunity before the hearing. Instruments Act complaints If you are being sued over a failure to honour a cheque you have written, you may be served with a complaint under the Instruments Act 1958 (Vic) (‘ Instruments Act ’). The procedure is slightly different from a standard suit for a debt. You will receive form 9A: complaint (Magistrates’ Court (Miscellaneous Civil Proceedings) Rules 2020 (Vic)), which gives only 16 days to file a defence (unless you live more than 80 km from the GPO, in which case it will be 21 days). Filing a defence to an Instruments Act complaint is more complicated than for a normal form 5A: complaint (Magistrates’ Court General Rules). Leave to file a defencemust be obtained, and will only be granted by the court if you pay the disputed sum into court beforehand, or satisfy the court by affidavit that you have a defence. If you wish to defend an Instruments Act complaint you should see a solicitor first. Apart from these differences, the court proceeding will generally proceed as with a normal form 5A: complaint and any resulting court order is enforced in the same way. Home loan default If you fall behind with payments on your home loan (or any loan secured over real property) the lender has a right as a mortgagee to take possession of the mortgaged property. Certain events have to occur before the mortgagee can gain possession. You must have been in default for the amount of time specified in your mortgage document as the period after which the mortgagee can take possession. This period can be as brief as one day. If no period is specified, that period will be one month. After this period has elapsed, the mortgagee must send you a notice to pay. This notice will specify the period in which the default must be rectified. This period will be disclosed in the mortgage or, if not specified, will be one month. Once this second default period has elapsed the mortgagee has power to enter into possession of the property, or apply to the court for a writ of possession. The power to enter into possession can be enforced immediately on expiration of the period specified in the notice to pay. No court action is required to take possession. The mortgagee can assert this right unassisted by just changing the locks. However, in order to avoid a suit for forcible entry, most mortgagees prefer to apply for a writ of possession. A writ of possession must be brought in the Supreme Court or County Court. Once you are