Being in debt

## What is a debt?

A
debt is an amount of money that you owe to someone else. There are
many different kinds of debts. Examples include:

* Rent
* Utility (electricity, gas and telephone) bills
* Loans (eg, for cars and credit cards)
* Parking fines
* Money (includes owed to family or friends)
* Taxation (eg, for amounts of tax outstanding)

If
you have a debt that you can’t pay on time or at all, your first
step should be to negotiate a payment plan with your creditor.

**NOTE:**
If you are unsure, it is best to receive independent legal advice.
you should contact the Consumer Law Centre on 1800 007 007.

**Letter**
of Demand/Default Notice

Your
creditor (i.e. the person you owe your money to) may send you a letter requesting you to pay your debt. .

If
your loan is covered by the National Credit Code,
no legal action can start until 28 days after a letter of demand or
‘Default Notice’ has been sent to you. The letter must say how
much you owe and what your rights are.

At
this point you can try to negotiate with your creditor to reach an
agreement without going to court.

## Contact your creditor

* Check that you are the **only**

debtor. . Is there anyone else’s name on the contract?

* Check that the amount your creditor claims you owe is the amount you actually owe. How much money do you have available? Decide how much

money you can pay back within a certain period of time.

* Approach the creditor by phone, in writing (see sample letter below) or in person.

* Always get the name, phone number and position of anyone you speak to about the debt. Make sure you keep copies of your correspondence.

* Ask the creditor to put any agreement in writing. If they do not do so, write to them yourself confirming details of any arrangements you

made.

## Sample Letter

(Name
of lender or creditor)
(Name
of department the letter should go to, e.g. ‘Customer service
department’)
(Address
of lender or creditor)
Dear
Manager,
Request
for change to repayments on the grounds of hardship
Account
name:
Account
no:
I/We
currently have a loan/account with (name of creditor) \_\_\_\_\_\_\_\_\_\_. The
account number is \_\_\_\_\_\_\_\_\_\_\_\_\_ and we pay $\_\_\_\_\_\_\_\_\_ each
(week/fortnight/month) \_\_\_\_\_\_\_\_\_\_\_\_ .
I/We
wish to apply to you for a variation of the above contract under
section 72 of the National Consumer Credit Code.
I/We
request that: (choose ONE of the following)
each repayment be reduced to ($ per week/fortnight/month)
\_\_\_\_\_\_\_\_\_\_\_\_\_. This change is requested from (Date) \_\_\_\_\_\_\_ until
(Date) \_\_\_\_\_\_\_.
the repayment due on (Date) \_\_\_\_\_\_\_ be postponed so that it is now
due on (Date) \_\_\_\_\_\_\_, with the next repayments being due on the
following dates: (Date) \_\_\_\_\_\_\_\_\_\_\_.
the repayments due between (Date) \_\_\_\_\_\_\_ and (Date) \_\_\_\_\_\_\_ be
postponed until (Date) \_\_\_\_\_\_\_.
I/We
understand that where I am/we are requesting the payments be reduced
or postponed, there will be no change in the annual percentage rate
and the term of the loan/account will be extended accordingly.
I
am/we are unable to meet my/our current payment obligations because:
In
support of my/our application I/we give the following details:
Details
of income and expenditure:
My/our
current income is ($ per week/fortnight/month) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
My/our
current expenses are ($ per week/fortnight/month) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
Rent/mortgage
($ per week/fortnight/month) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
Other
loan repayments ($ per week/fortnight/month) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
Other
major expenses ($ per week/fortnight/month) \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
I/We
expect that I/we will be able to meet the obligations of our
loan/account if you agree to this proposed change.
I/We
understand that you will give me/us a written reply within 21 days of
receipt of this application, stating whether or not this variation
has been agreed to, and provide me/us with the name of your external
dispute resolution scheme and my/our rights under that scheme if this
application is refused.
I/We
assume you will stay all enforcement action while you consider this
application. If this is not possible, please let me/us know
immediately in writing.
I/We
await your reply in writing.
Yours
sincerely,

## Your Creditor Takes Action Against you

If
you do not answer a letter of demand or default notice, your creditor
may take legal action by lodging a claim with a court or tribunal. A
claim must be given or ‘served’ on the person named as the
defendant or respondent by being:

* Handed to them (‘personal service’
* Handed to

 a person who appears to be over 16 at the home address, or last
 known place of residence or place of business, of the person named
 as the respondent or defendant; or

* In some

 cases the claim may be served by post or possibly even by email or
 social media.

* When

you receive a claim you usually have around 28 days to act.

* You

may still try to negotiate with your creditor directly and come to an
agreement about how the debt will be paid.
If
you cannot negotiate a payment arrangement with your creditor and
your loan is unsecured, the creditor can seek to recover the money by
taking you to court. If the loan is secured, the credit can get
permission from the court to sell the security and can recover any
amount still outstanding after the sale.

=== What
happens if I do nothing? ===
If
you do nothing within 28 days of receiving a claim, your creditor may
apply for a ‘default judgement’. After the judgement, the credit
is referred to as a ‘judgment creditor’ and you are referred to
as a ‘judgment debtor’ and you are liable to pay the ‘judgment
debt’. A default judgment is enforceable for 12 years.

If
you do not appear, the court can make an order to prepare a warrant
for your arrest. You are advised in writing and given 14 days to
attend court. If you do not, the warrant is then issued.

## **In the court or tribunal**

Bring
any information relevant to your financial affairs, including a
completed budget.

If
you don’t provide written financial information to the court, you
may be ordered to appear before the court to answer questions about
your financial circumstances. This is called an ‘oral examination’.
This normally takes place outside the courtroom with a representative
of the creditor (often a solicitor) and the judgment debtor.
Sometimes a court staff member will also be involved. You will be
asked questions about your income and expenses, assets and
liabilities. You will have to answer these questions but you do not
have to make any offers to pay at this stage.

## **A judgement is entered against you by the court or tribunal**

If
a judgment is entered against you by the court or tribunal, you can
ask the court to let you pay the debt in instalments.??? If your
offer to pay by instalments is not accepted, or you do nothing, the
creditor may begin ‘enforcement proceedings’ against you. You
will need to provide financial information such as your income,
assets and bank account details to the court. This financial
information can help the creditor to decide whether they should
proceed to recover their debt and, if so, what enforcement action to
take.

## **Making you pay the debt**

### Earnings Redirection Order

Your
creditor can obtain a court order requiring your employer to deduct
money from your wages over time to recover the debt.

You
may apply to revoke the order on the grounds of financial hardship,
or apply to pay by instalments.

An
Earnings Redirection Order will not affect you if your only source of
income is a social security payment.

### Centrelink

They
are not available for Centrelink payments except where the debt is
for an overpayment to Centrelink. However, once a Centrelink payment
is paid to your account, it becomes part of the customer’s funds.
Creditors may then take payments from your account.
An
amount called a ‘saved amount’ cannot be taken from your account.

This amount is equal to:

* Your total Centrelink payment, including advances, paid into the account

 in the 4 week period immediately before the order,

* Minus the

 total amount withdrawn from the account in the same period.
If
a creditor is trying to take money from your bank account and you get
Centrelink benefits, you should get legal advice.

### Commonwealth Public Servants

Special
rules exist for making a claim against the wages of Commonwealth
Public Servants. Speak to your pay officer to find out which rules
apply to your circumstances.

### Seizure and Sale Order

A
‘Seizure and Sale Order’ authorises a court staff member, called
the ‘sheiff’ in the ACT to visit your home, take certain goods
owned by you, and sell them to cover the amount of the debt.

Certain
property cannot be taken in this case. This includes clothing, tools
of your trade up to a certain value, bedroom and kitchen furniture,
and property not owned by you, for example, furniture on
hire-purchase or lease.

If
you are not home, the sheriff will leave a calling card. You have the
option to arrange a meeting, usually within 14 days, to discuss your
options. Sheriffs usually do not take anything on the first visit.
You can apply to the court to pay by instalments and for any further
action to be put on hold (called a ‘Stay of Proceedings’). If
your offer to pay by instalments is accepted but you default on a
payment the order can be re-executed and the full amount payable.

The
court may recover from you an application fee for the order and any
cost to them of selling your goods.