It is easy to get into debt but remember there is always help available. The sooner you address your debt problem the easier it will be to sort it out.


Julie Zhou


Your rights and options

Last updated

1 July 2021

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 (seeServices that can help with debt‘).

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 from the creditor that while negotiations are on foot, no legal action will be initiated and no default listing will be placed 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 the negotiation 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 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 (e.g. you may have lost your job or suffered illness), you may be able to apply to the creditor for a variation of your contract 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 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 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 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, they may be at risk of action by the creditor.

6 File for bankruptcy

A sixth option is to file for bankruptcy, or 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.

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).

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