Debt in NSW - Your Options

Debt in NSW – Know Your Options

If you find yourself in debt, there are a few key things you should know about how the matter will progress under Australian law. The following is a list of steps you should undertake if you have a dispute regarding debt.

1. Deal with debt as soon as possible

If possible, speak to the people you owe money to (creditors) regarding a payment plan. Communication and realistic repayments are key.

2. Respond quickly to any letter of demand

A letter of demand will likely be the first formal recourse from the creditor in order to attempt to reclaim what is owed. The letter should state the amount owed, a time frame in which to provide payment, and the possibility of further legal action following non-compliance. It is important that you respond to the letter of demand, even if you are under the belief that the amount owed is incorrect.

If you disagree with the claim, write a letter of dispute. If this dispute is made within 30 days, under Australian law the creditor is not permitted to contact you again until proof of debt is supplied in writing.

If you do accept you owe the money, but cannot pay it at the time, get in contact with the creditor. They may be able to organise repayments out of court that you can afford.

It is usually not beneficial for either party to go to court proceedings, so coming to an arrangement outside of court it will be the first option. Most disputes over debt are solved at this stage. However, in some cases it may progress further to a statement of claim.

3. Deal with any statement of claim

A statement of claim is from the local court and signifies the creditor has progressed to legal proceedings. At this point, you can either file a response to the court within 28 days, or deal with the matter through external negotiations. Your options are:

  • ignoring it (in which case the court will rule on the side of the creditor in a default judgement),
  • filing a defence,
  • agreeing to pay the debt, agreeing to pay part of the debt (in which case you will still need to file a defence to the court), or
  • to file a cross claim.

If the court files in favour of the creditor, they will then have 12 years to recover the debt through either an examination notice, a garnishee, or writ for levy or property.

If you find yourself in debt and being pursued by a creditor, don’t ignore the issue. Most of the time, it can be solved outside of court, saving both parties time and money. However, if you do decide to dispute it, get legal advice, because if the matter does progress to court and you lose, it can leave you in an even worse position financially than when you began.

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