Legal action lenders could take
What to do if you're being taken to
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
Get help from an
Contact an Ombudsman
You can talk to an Ombudsman Service about whether they can help
you. This won't cost you anything.
Contact the Financial Ombudsman Service
(FOS) 1800 367 287 or the Credit and Investments
Ombudsman (CIO) 1800 138 422.
An Ombudsman Service may be able to assist you obtain a hardship
variation, negotiate more time to sell your home at a
better price, or stop debt collectors from pursuing you for an old
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.
If your credit provider refuses your request, it must respond to
you in writing and tell you which external dispute resolution scheme you can go to,
which will be either FOS or CIO (see the contact numbers
Keep making repayments on your home loan
If you go to FOS or CIO 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 FOS or
Just remember that a lender must take a number of steps before
it can repossess your home, so don't panic. See behind on
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
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
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
Case study: Emily gets help on her debts
Emily 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 her lender's external dispute resolution (EDR)
scheme. Emily's complaint is that the lender did not assess
her ability to repay her debts before offering her more
The EDR scheme 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.
Last updated: 18 Apr 2017