Debt for debtors
If you owe someone money then you have a debt - you are a debtor and the person you owe money to is a creditor.
Important: the laws about debts are not the same in all states. These questions and answers are for Queensland only. You always have to look at where the debt started and other surrounding circumstances - these are not always easy questions. If you have any doubts, ask a lawyer for legal advice.
On this page:
I lost my job and now everything I owe is overdue. Is there anything I can do to stop them suing me?
Yes, there is. Although a creditor can start court proceedings if you don't pay, they can't usually start court proceedings the minute you are one payment behind. You can:
- contact the creditor and try to agree on a new repayment arrangement, at least for a time
- if you can show financial hardship, you can ask the credit provider to change (vary) the contract during the time of hardship and if the credit provider refuses, you can apply to court for an order to vary the contract.
- contact a financial counselling service which may be able to help you with a payment plan to take to the creditor
- ask a lawyer for legal advice. Like the financial counselling service, the lawyer may be able to help you with a payment plan to take to the creditor
I've split up with my partner and we have a loan in both names from the bank/credit union with repayments each month. As long as I pay my half they can't do anything, can they?
Yes, they can. Banks and other financial institutions don't care who pays, they just want their money.
Nearly always when a loan is in both names, the debtors are jointly and severally liable - that means the creditor can chase either of you for the whole amount each month, and if it gets to the point where they can take you to court, they can take either or both of you to court.
If you are working and your partner isn't, or the creditor has your address but not your partner's, the creditor might only chase you.
You are not usually liable for the debts of your partner. You will only be liable if you were a joint debtor or if you provided a guarantee.
Someone came to my door yesterday and gave me some court papers saying I owe money to a finance company but there's no court date. What do I do now?
If you get court papers, always ask a lawyer for legal advice. The lawyer will need to see the papers. You've probably been served with a Claim and Statement of Claim. If you have, there won't be a court date unless you file documents to argue about whether or not you owe the money.
If you don't agree that you owe the money, or if you agree you owe some money but not the amount in the papers, you'll need to file a defence.
You only have 28 days after you've been served to file defence documents. If you don't file a defence within that time the creditor can apply to the court for judgment just by lodging more paperwork (called a default judgment), and the court can make an order saying that you owe the money (called a money order).
It is usually not too difficult for you to get rid of a default judgment if you do it quickly, but if you do, you may have to pay the creditor's costs and then you have to file defence documents.
If you know you owe the money, it's not usually a good idea to file defence documents. It will probably end up costing you more in the long run.
Even if you know you owe the money, it's always a good idea to talk to a lawyer and get legal advice. You can still try to negotiate with the creditor after you've been served.
Sometimes the creditor will agree to a new arrangement and agree to not keep going with the court proceedings while you are paying under this new arrangement. In this case you should get the creditor to give you a promise in writing not to keep going while you are paying. Ask a lawyer for legal advice about this.
I've got a court order saying I owe a lot more money than my original debt and I still can't pay it. What's likely to happen now?
There are lots of ways a creditor can try to get the money you owe - this is called enforcing the money order. For all of them the creditor needs to apply to the court. The creditor can do things like:
- make you go to court to answer questions about your financial position, like if you own property or have other debts. This is called an enforcement hearing summons. It can help the creditor to decide whether you own anything and whether it's worth going further. You get served with a summons to go to court to answer questions about your financial position. If you don't go to court, the court can issue a warrant to arrest you. If you do turn up, you can agree to weekly/fortnightly etc payments and the court can order this.
- get money from someone else that you get money from. This is called an enforcement warrant to redirect earnings/debt. So if you have a job and get wages, or you have money in the bank, the creditor can apply for this warrant. If you're on the dole or a pension the creditor cannot use this type of warrant because it doesn't work for government benefits.
- force you to sell things you own by getting a warrant which lets the creditor organise for your property (except essential property) to be taken and sold. This is called an enforcement warrant for seizure and sale of property. The property must belong totally to you - if you and your partner jointly own property then this doesn't work.
- get an order for the money order to be paid back by instalments over time, because you can't afford to pay it back all at once. This is called a warrant for order to pay by instalments. The court looks at your financial position to see whether the repayment proposal is reasonable. If the court agrees, then the creditor can't take other action to get the debt paid.
- bankruptcy. If the debt is over $2,000 the creditor can take steps to bankrupt you - this is more expensive for the creditor than the other things. If you own property jointly with someone else, your interest in that propery is dealt with in the bankruptcy and the trustee may sell your interest in the property.
Remember that just as the creditor can ask for and get an order for the money to be paid back by instalments over time, you can go to court and ask for this. Or you can go into bankruptcy voluntarily - but this has other consequences which you may not want. Always ask a lawyer for legal advice about what you can do and how it will affect you.
I went for a bank loan and the bank said it wouldn't lend me any money unsecured, but maybe I could get a secured loan. What's the difference?
You can borrow money and give the creditor something which 'secures' the debt if you don't pay.
For example, if you borrow money to buy a house and then you sign a mortgage to the bank or other financial institution, your house is the security.
If you sign something which gives the creditor something for security, like your house, then if you don't pay, the creditor can eventually take your house. The creditor has to go through certain procedures set out in the law first, like giving you notice and some time to pay.
If you don't give something for security then the creditor has nothing to take without first going to court to get an order that you owe the money. The creditor can then try to enforce the order (see previous question and answer).
If you give the creditor security and the creditor sells the security but doesn't get enough to cover the debt so you still owe money, then the creditor can go to court and get an order that you owe the remaining money.
I owed money a long time ago. Just recently I have been getting phone calls from some other company saying I owe the money and that they can send me to jail if I don't pay. Is this right?
No, it isn't. But you do need to find out if a money order has been made against you, and if it has, find out the date it was made.
Sometimes creditors sell your debt to another agency, so someone other than the original creditor could be chasing you because they bought the debt.
If it's more than six years since the debt was owing and nobody went to court and got a money order against you, then it may be too late for anyone to get a money order against you.
If the creditor did get a money order against you but it was made more than six years ago, then the creditor has to ask the court for leave to be able to enforce the debt at all (unless you went bankrupt).
Although the creditor can't get you sent to jail for not paying, if there is a money order against you and you get a summons to go to court and you don't turn up, the court can issue a warrant and have you arrested to take you to court. This is not the same as going to jail. You cannot be sent to jail for civil debts.
I've been given paperwork which says I have to go to court next week for an enforcement hearing, but I don't owe the money. What can I tell the court?
Once you get court papers saying you must go to an enforcement hearing, the creditor already has a money order against you. It's too late at the enforcement hearing to try to tell the court you don't owe the money.
The enforcement hearing is for the creditor to get details of what you own and owe, and your entire financial position. The court won't be interested in listening to you saying you don't owe the money, because as far as the court is concerned, you do.
You can go to the court registry and ask to see the court file so you can find out when the order was made against you. The creditor might have got an order by default if you or someone at your last address were given court papers and you didn't file a defence. In some cases you can get the money order set aside, but you should get legal advice about this.
If you get given court papers, especially a summons to go to court, always ask a lawyer for legal advice.
I got knocked back for a loan and the bank told me there was some problem with my credit rating. I did get behind in a loan a few years ago but I paid it all out in the end. How can I find out about my credit rating?
Veda Advantage is an organisation which collects credit information in Australia.
If you have ever applied for credit then you have a credit history or credit file.
When you don't pay a loan and this non-payment is registered with Veda Advantage, it goes on your credit file and stays there for some years as part of your credit history.
If you apply for a loan, the bank or other lender will ask you to sign something which lets the lender look at your credit file.
You can look at your own credit file by contacting Veda Advantage. It's free if you ask in writing and wait for a few days - if you want it more quickly you can pay.
If you find a mistake on your credit file, like an overdue account that you have paid or an overdue account that is not yours, you will need to contact the lender and get the lender to contact Veda Advantage. You may also get help from Veda Advantage. Veda Advantage has its own guidelines that are set out on its website.
Legal Aid Queensland publish a free debt self help kit. If you owe $50,000 or less, this kit may help you.