Legal action lenders could take

What to do if you're being taken to court

If you are being hassled by a credit provider or debt collector about a debt (including outstanding loan repayments), you need to take action straight away - even if you're not sure if you owe the money or you don't agree with the amount. 

These steps will help you understand your rights if a lender takes legal action to recover a debt.

Work out your options

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. Help is available.

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, you can 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.

Get help from a dispute resolution service

Contact the Australian Financial Complaints Authority (AFCA)

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.

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.

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 you are in the situation where 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. 

Get free legal advice

At any time, you have the option of getting free legal advice from a community legal service, which can help you understand your rights, explain how to respond to the notice you are being taken to court, and represent you during legal proceedings.

You can also see a financial counsellor who can explain how debt recovery procedures work and help you understand your options. Financial counselling is a free and confidential service.

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.

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.

If you're being taken to court or hassled about a debt, don't ignore it because that will only make things worse. Get help straight away.


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Last updated: 05 Nov 2018