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 The first step in agreeing to make a legally binding agreement. An offer must be accepted before there can be a legally enforceable contract. For example, a person can offer to sell their car for $5000 and a buyer can accept the offer and pay that purchase price. or agreement that you make or sign. If you require assistance then you should contact a community legal Formal delivery of legal documents to a person to tell them there are court proceedings against them which they must defend, or to make sure a witness in a case knows when they have to go to court to give evidence. 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 The person or organisation to whom a debtor owes a debt. and attempt to negotiate repayment of the Money that is owed by one person or business to another. 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 from the creditor that while negotiations are on foot, no legal action A document that sets out what a person wants to happen to their money and other property after they die. be initiated and no Failure to do something that is legally required. For example, a person who fails to make a payment on their car is in default on the loan; if they continue to be in default the creditor may issue a default summons to take the debtor to court. listing will be placed on your A debt that does not have to be paid until some future time. Being allowed to pay later, in the future, for something you are getting now. report.
Making an offer to the creditor
If you make an offer to the creditor to repay the debt by instalments, it often speeds the An approach to dispute resolution where both parties discuss the matter in dispute between them, with the aim of reaching a settlement through a consensus, compromise or agreement. See ADR (alternative dispute resolution); arbitration; conciliation; mediation. process if you can include with your written offer a statement of your financial position. This statement 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 An independent body that hears legal claims brought by parties and decides between them. Serious cases are heard by a judge and jury, or just a judge. Less-serious cases are heard by a magistrate. 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 variation of your An agreement that the law will enforce. on the ground 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, Under the Australian Consumer Law, a person who buys goods or services for less than $40 000 or for personal or home use. 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 which is a percentage of the debt. Many creditors will accept a reduced lump sum to finally settle a debt.
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 A document signed by parties ending a court action. The party who began the action agrees to drop it, often in exchange for a payment by the other party. Also called terms of settlement. you from the debt, it is vital that you obtain written confirmation of this. In the confirmation, advice 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 To make people obey a law or the terms of an agreement, using police powers or court orders. 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, they may be at risk of action by the creditor.
6 File for bankruptcy
A sixth option is to file for When a debtor who cannot pay their debts has their money and property taken over and managed by a trustee who uses it to pay back creditors. The debtor is then called a bankrupt., or enter into a formal arrangement under the Bankruptcy A written law made by parliament. Also called an ‘Act of parliament’, ‘statute’ or legislation. 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 Money or property promised to be handed over as a guarantee for repayment of a loan, or as a guarantee that a defendant will meet their bail conditions. 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.)