Owing money to somebody (a creditor) can put you in an intimidating position. If you haven’t paid your bills by their due date, you may start to receive phone calls or demands to make payments. There are many feelings that go along with falling into debt, but feeling harassed shouldn’t be one of them.
If you owe money, it is important to understand your legal rights according to debt and bankruptcy laws in Australia.
Outline of the process for debt collection
1. Default notice
A lender or creditor will usually issue a default notice as a first point of action after a friendly reminder. The default notice falls under consumer credit law, and must fulfil the following requirements:
- How you have failed to comply with your credit contract
- The requirements for you to remedy the situation
- The period of time you have to remedy, which must be longer than 30 days
- Notify you that they will commence proceedings to enforce the contract
2. Letter of demand
A letter of demand can have tighter timeframes than a default notice. A letter of demand is usually the last notice that you will get before being taken to court for non-payment. Debt and bankruptcy law in Australia stipulates that the letter of demand only requires a notice of seven days to repay debts.
If you receive a letter of demand, check the amounts that you owe and obtain all the information that you can. There is a limited amount of time in which a creditor can sue you for a debt. If you have not acknowledged a debt for six years, including not having made any payments toward the debt, you may not have to pay it.
Outside of this process, creditors have legal responsibilities that they must follow. A creditor, including their agent (usually debt collectors), is not legally allowed to threaten, harass or physically intimidate you.
Even when creditors and debt collectors are acting within their rights, owing money can be a stressful time. Consider your options if you owe money:
- Offer to pay some of the debt or instalments to get the collector off your back while you pay.
- Request a full or percentage waiver of the debt due to financial hardship as a final settlement.
- Apply for voluntary bankruptcy or a debt agreement.
- Consider alternatives covered in previous posts ‘In Debt? Alternatives to Bankruptcy’ and ‘Debt Collectors – Tips for Dealing with Them’.
There are free financial counselling services in Australia that can offer guidance on debt issues. Financial counselling may help you to make the right decision to alleviate stress due to debt.