NSW Debt Collectors for Old Debts - Pay, Leave or Bankruptcy?

[dragonsden]

Hello,
I lost my business over 5 years ago and went through a very dark time in my life shortly after. I let my finances go and had a string of unsecured debt build up unpaid (a phone bill, credit card debt, small personal bank loan and energy bill) and they total about $20k.

I would be open to an arrangement, BUT I am told that this will reset the clock and it will be a struggle to pay. They show lodged on my credit file in 2009 and the latest in 2011 - It says on the credit file that 3 will be deleted in early 2015 and one in 2017. I have now got a credit company called Lion (debt collectors) ringing me to pay these debts and don't know what to do.

Can they make me bankrupt if I don't agree to pay or is it best to arrange payment ? Or will this reset the clock? I have lived a half life because of this hanging over me for almost 5 years and just want this mess behind me. Please help.

 

[James D. Ford - Solicitor]

Hi @dragonsden

fyi - there are Financial Counsellors throughout Australia who can provide financial insolvency related advice to you for free.

"Financial counselling hotline 1800 007 007
The free hotline is open from 9:30am to 4pm, Monday to Friday. When you call this number you will be automatically transferred to the phone service in your state. Calls from mobile phones may incur a fee from the mobile phone carrier.

Get an online debt assessment
Use the free Debt Self Help Online Assessment Tool from Financial Counselling Australia to get a tailored assessment of your debt situation. You can also contact a financial counsellor through their website."

You need to be aware of the following:

1. that any creditor or debt collector can lodge a claim in a Court / Tribunal with the aim of seeking an enforceable Court judgement against you; and
2. if the judgement is for more than $5k, this can be used as the basis for a bankruptcy notice to be issued against you...

If you do not pay the debt, or at least enter into an arrangement to pay all or part of it, it is highly likely that at least #1 above will occur, and #2 is a possibility depending on the amount of the debt.

A Court judgement automatically appears on your credit file, so don't count on the fact that entries on your credit file from the past are scheduled to be deleted.

The Option of Interim Relief

"A declaration of intention to present a debtor’s petition (DOI) is an option under the Bankruptcy Act that provides temporary relief to allow you up to 21 days to decide whether to proceed with bankruptcy or another option.

During the 21-day period, unsecured creditors cannot take any action to recover debts, including recovering money or seizing unsecured assets.

In this time you can consider your financial circumstances, negotiate with your creditors and, where possible, make suitable arrangements to avoid the formal arrangements under the Bankruptcy Act (a debt agreement, a personal insolvency agreement or bankruptcy) that may be suited to your circumstances.

A DOI is not recorded on the National Personal Insolvency Index (the public register of all personal insolvencies). Your creditors are notified of your application, advised of the stay on enforcement action and provided with a copy of your financial affairs.

You do not automatically become bankrupt after the 21-day stay period. If you have not come to a suitable arrangement with your creditors during the 21-day period and you do not voluntarily apply to become bankrupt during or at the end of the period, your creditors might choose to apply to the court to make you bankrupt.

Kind regards, James

 

[dragonsden]

Thank you for reply. I will endeavor to call the number you provided ( just hard as I work those hours but I will make it happen as need advice badly).

Do you know though why I have been left alone for 4 years and is it going to reset the debt clock on my credit file if I make a solution as it is almost time for them to drop off ?

 

[James D. Ford - Solicitor]

Hi @dragonsden

Great, let me know how you go with the Financial Counsellor.

There are ways that a settlement can be handled so that it does not impact your credit file. This would be via an informal settlement agreement. However, your creditors must be willing to agree to settle. Please let me know if you think this is a possibility, as I may be able to assist you with negotiation/the settlement agreement.

However, as I have mentioned previously, if you do nothing and a Court judgement is ordered against you, your credit file will be automatically updated.

This link on credit file health should assist you to understand what triggers updates to your credit file.

Kind regards, James

 

[dragonsden]

Thanks again . .I will try calling tomorrow and yes I might call on you too as I think they are willing to settle as debts are old going on 5 years now. Do they have to warn me before they issue a court judgment on me?
And if the largest debt was originally with a bank and now the debt is sold to Lion collections are they just and likely to pursue me in court ?

any help with the above questions is appreciated

 

[James D. Ford - Solicitor]

Hi @dragonsden

You are sent you a final letter of demand to pay the $$, if one has not already been sent to you. Then if you still have not paid,
they may then decide to commence legal proceedings against you. You are personally served with a copy of their claim and provided an opportunity to submit a defence, before the Court makes any judgement.

The debt collector will as a rule, normally settle rather than taking the matter to Court. However, it depends whether they are acting as agent for the bank, or have purchased the debt, and if so, how much they paid. Normally you are sent a Notice of Assignment of Debt when a Debt is sold, did you receive one?

Kind regards, James