Trouble with debt

Help with debts

If your debts are getting out of control or you're struggling to make ends meet, it's important to act quickly. 

Here are we explain the practical steps you can take to ease the stress, get your finances back on track, and understand your rights if a lender takes legal action to recover a debt.

Talk to your credit provider

If you are finding it hard to keep up with utility bills (electricity, gas, phone or water), credit cards or loan repayments, the first step is to tell your credit or service provider that you're experiencing financial hardship. Taking action straight away can stop a small problem becoming a big one.

Many companies have hardship officers who can assess your situation and work out what help is available. Whether they can help you will depend on why you are having difficulty making payments and how long you think your financial problems will continue.

Hardship officers can also help you work out an affordable payment plan, such as paying bills in instalments or temporarily altering your loan repayments.

Apply for a hardship variation

If you can't keep up with repayments on your credit cards or loans (for example, because of illness, unemployment or changed financial circumstances), ask your credit provider for a 'hardship variation'.

For a home loan, depending on when you took it out there are different thresholds (maximum amounts allowed) for accessing a hardship variation, see hardship threshold

How to apply for a hardship variation

  1. Contact your lender or credit provider - by phone or in writing
  2. Ask to speak to a 'hardship officer' or to 'customer service'
  3. Give the details of your loan (account name and number, and the amount you pay each week/fortnight/month)
  4. Say that you want to change your loan repayments because you are experiencing hardship (as set out in section 72 of the National Consumer Credit Code)
  5. Explain why you are having difficulties making payments, how long you think your financial problems will continue and how much you can afford to repay

Sample hardship letters

The Financial Rights Legal Centre have a sample letter generator to help you create professional and legal letters to send to financial service providers like banks, creditors and insurance companies.

How long should the lender take to respond?

When you apply for a hardship variation, the credit provider must respond to your request in writing within 21 days letting you know the outcome of your hardship request (unless you need to provide them with more information).

If the credit provider asks you for more information to help them make a decision, you must give this to them within 21 days. Remember that credit providers have a legal obligation to respond to you if you are having problems paying your loans.

How you can change your repayments

Here are some of the options you could discuss with your lender:

  • Extend your loan period, so you make smaller repayments over a longer period
  • Postpone your repayments for an agreed period
  • Extend your loan period AND postpone your repayments for an agreed period
  • Other ways to make your loan repayments more affordable

When negotiating a repayment plan, make sure you can afford it. There is no point agreeing to an amount that is too high for you to pay.

If you find you can't stick to the new arrangement, tell your credit provider straight away. Keep paying as much as you can afford, even if it is not as much as the credit provider is asking for.

You can complain

If your credit provider refuses your hardship application, they must give reasons. If you are not happy with their response you can ask to speak to their internal complaints section.

If you are still not satisfied with the outcome, you can lodge a dispute (for free) with your credit provider's external dispute resolution (EDR) scheme - the Australian Financial Complaints Authority (AFCA). You can call them on 1800 931 678.

Ask for help if you're struggling with debt

You don't have to go it alone. There is free and confidential help available to assist you to get a clear picture of your situation and understand your options:

  • Financial counselling: A free service offered by community organisations, community legal centres and some government agencies, see financial counselling.
  • Free legal advice: Available from community legal centres and Legal Aid offices in each state and territory, see free legal advice.

If you're in a crisis and need emergency relief or emotional support see our urgent money help webpage.

If some of your financial problems are due to another person running up debts in your name, or pressuring you to spend money or sign up for a loan, you may be experiencing financial abuse. Visit our financial abuse webpage for a list of organisations that can help you.

If you are being intimidated by someone trying to recover a debt, there are things you can do to stop their threatening behaviour. See dealing with debt collectors.

Debt solution companies

It might sound like a good idea to pay someone to help fix your credit history, but credit repair agencies and debt solution companies may not always be able to do what they claim. Find out what debt solution companies can and can't do for you.

What to do if your lender takes you to court

If you have received a notice that you are being taken to court for the debt you owe (such as a summons, statement of claim or liquidated claim), you must act quickly.

Decide if you agree you owe the debt

The first thing to do is to decide whether you agree that you owe the debt or dispute it. Legally, you may not have to pay the debt if it is an old one.

Apply to pay by instalments

If you agree that you owe the debt but can't pay the full amount, ask your lender or credit provider whether you can pay off the debt by instalments.

Or you can go to court and make an application to pay the debt by instalments.

Request a postponement of enforcement

You have the right to request a postponement of enforcement from your credit provider to stop the repossession of your goods or home. Use our sample letter request for postponement of enforcement to draft your letter or you can go to court and request a postponement of enforcement.

Get help from a dispute resolution service

You can talk to the Australian Financial Complaints Authority (AFCA) on 1800 931 678 about whether they can help you. This won't cost you anything. You will generally only be able to lodge a complaint with AFCA after you have tried to negotiate with the lender.

Keep making repayments on your home loan

If you go to AFCA and your debt involves outstanding repayments on your home loan, do your best to keep making repayments (even if they are small or less frequent). This will help you avoid getting into a worse financial position while your dispute is being handled.

If a hardship variation will not assist you or the value of your home is falling, then you may be better off dealing with your lender in court as quickly as possible, rather than risking further delay by going to AFCA.

Just remember that a lender must take a number of steps before it can repossess your home, so don't panic. See problems paying your mortgage for details.

Case study: Emily gets help on her debts

Woman seeking help with her debtEmily is in her 60s and has a chronic health condition that only allows her to work a few days a week.

She has two credit cards from the same lender that are both maxed out. One card has a limit of $5,000. Over a 5-year period, the credit limit on the other card has grown from $3,000 to $20,000 as Emily has said yes to invitations to increase her limit.

When Emily's condition worsens, she is unable to work and falls behind on the monthly repayments on her $25,000 debt. The lender starts legal action to recover its money. Having no savings or assets to sell, the only way Emily feels she can pay back the lender is to sell her family home.

She gets advice from a community legal service, which helps her make a complaint to AFCA. Emily's complaint is that the lender did not assess her ability to repay her debts before offering her more credit. 

AFCA hears Emily's complaint for free and makes a decision that allows her to keep her home and pay off a reduced debt of $10,000 by monthly instalments.

Money problems are stressful but you do have options. Take action now by talking to your credit or service provider and working out a plan to get yourself back on track.

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Last updated: 02 May 2019