Debt
Last updated 12 April 2010
This factsheet is for people who have a debt or who are having trouble with money because they have been affected by a bushfire. It will explain your legal rights and options, and has the contact details of organisations that can help you.
You can order a hard copy of this factsheet from Victoria Legal Aid.
What if I am having trouble paying my debts because I have been affected by a bushfire?
What to do first
Tell your creditor about your situation as soon as possible. A creditor is the person or organisation to whom you owe money. You can try to change your repayment plans with the creditor by asking for more time to make payments or to pay back what you owe by instalments. Tell the creditor what you can afford to pay and how much time you think you need. A financial counsellor can help you with this. Financial counsellors provide free help for people with debt problems.
Hardship variations
If your debt is a credit card, personal loan or home loan (not a business loan) you may also apply for a ‘hardship variation’ to change your contract with the creditor. A hardship variation can give you more time to pay (called ‘extending the length of a loan‘), reduce the amount you are paying with each payment or give you a break from paying anything for a period of time.
If your creditor does not agree to the variation and your debt is less than $350,240 (valid to 10 April 2010) you may apply to Victorian Civil and Administrative Tribunal (VCAT) for an order to change the terms of the contract. This amount changes each month, so check the 'hardship threshold' on the Credit Code website listed below. Contact the Consumer Action Law Centre on 1300 881 020 or read their fact sheet How do I change my loan payments if I have suffered hardship.
You can read more about hardship variations at the Consumer Credit Code website.
If you have a business debt, you can still try to change your repayment plan with your creditor. A financial counsellor or legal service can help you do this.
Ombudsman and dispute resolution
If you do not want to apply to VCAT for a hardship application, or you wish to apply after 30 June 2010 (when VCAT will no longer accept hardship applications), go to your relevant lender dispute resolution scheme. This will be either the Financial Ombudsman Service or the Credit Ombudsman. They will look into the details of your situation, talk with your creditor and try to work out an agreement between you and the creditor. Both Ombudsmen cover business debts, which VCAT does not. However, people often choose to go through VCAT because it is much quicker.
Contact the Financial Ombudsman Service on its Bushfire and Flooding Disaster Hotline 1800 337 444 to get help and information on financial and insurance.
Also contact the Credit Ombudsman on 1800 138 422.
Financial counsellors
A financial counsellor can help you work out how to pay back your debt, write up your budget and liaise with creditors. They can also give you names and numbers of other services which may be helpful, such as for family support or to overcome gambling or get personal problems.
There will be financial counsellors in many bushfire affected areas to help people get government and other assistance. Contact Consumer Affairs Victoria on 1300 558 181 to find a financial counsellor near you.
Help from banks and other creditors
Many ‘lenders’ (the creditors that lent you money) offered to stop home loan repayments for up to 12 months or to stop fees for bushfire affected people. Creditors should also have offered hardship variations. Contact your lender for more information on these options and to see what other help they may offer.
As a general rule, lenders should not be offering you a refinance, credit increase or extra loan at this time. These increase your debt. You may have trouble paying back this extra money.
What can the creditor do if I don’t pay the debt?
Going to court
Usually a lender can charge you a higher rate of interest once you are behind in your repayments, plus legal and enforcement costs and take you to court to sue you for the money you owe them.
If you get a letter of demand from a lender or are served with court documents (for example a ‘Complaint’ or ‘Writ’), get legal help urgently. Contact Consumer Action Law Centre on 1300 881 020 which specialises in debt and credit matters or the Federation of Community Legal Centres on 9652 1500 (to find a community legal centre near you).
You will only have a short time to act. If you do not put in a defence promptly a court order will be made against you requiring you to pay all the money you owe, (not just the arrears), plus interest and court costs. If the debt is your home loan, you are likely to find that a court has also ordered the repossession of your home.
You should apply for a hardship variation before a lender takes court action against you. If you have been served with court documents you may still apply for a hardship variation at VCAT or with the relevant ombudsman scheme. Contact the Consumer Action Law Centre for advice and help with this. Once a court has made an order against you, it is too late to apply for hardship.
Credit reports
To find out if a court order has been made against you in the past, you can order a copy of your credit report, which will have this information. Your credit report also has information about your credit history, including requests for loans (including applications for mobile phones and utilities), late payments and unpaid debts.
Note: if you request your credit report, your contact details will then become available to any lenders who check your report. To order your credit report visit the My Credit File website.
More information
Read the factsheets What happens if you do not pay a loan? and How do I get a copy of my credit report? at the Consumer Action Law Centre website.
Do I have to make mortgage payments if my house was damaged, destroyed or if my situation has changed because of the bushfires?
You still need to pay your mortgage but there are steps you can take to make this easier.
Contact your lender and try to arrange changing or stopping your repayments for a period up to 12 months. A financial counsellor can help you with this. If your lender does not agree, you should apply to VCAT or the relevant ombudsman scheme for a hardship variation.
Hardship variations do not apply to investment properties and your mortgage must be less than the relevant threshhold amount (see above). Contact the Consumer Action Law Centre for legal advice. For information on mortgages see the Fitzroy Community Legal Centre’s Law Handbook, Conveyancing and mortgage factsheet.
Can I access my superannuation to help pay my debts?
Checking to see if you are eligible
You may be able to get your superannuation early if it is used to stop your lender selling your property, for medical reasons (or paying expenses to do with the medical needs) or the death of someone dependent on you. There are other special circumstances. You will need to talk to your superannuation trustee.
Note: some people on certain Centrelink pensions can get their superannuation early. You need to contact Centrelink to see if you can do this. There are different numbers to call depending on what payment you are on. Check the Centrelink website for phone numbers.
Making the application
If you are eligible, you will need to apply to get your superannuation early through the Australian Prudential Regulation Authority (APRA). The application forms are on the Australian Prudential Regulation Authority website.
There are different forms depending on your reason for wanting to get your superannuation early – make sure you use the right form. If your application is refused, contact a financial counsellor or get legal advice. They can also help you with applying in the first place.
In special circumstances you may not have to go through the Australian Prudential Regulation Authority and may be able to apply directly to your superannuation fund. In this case, ask your trustee how to apply.
You usually pay high tax on your superannuation if you get it early, often between 20% and 25%. Contact the Australian Taxation Office on its Emergency Support Infoline 1300 304 975 to find out how much tax you will have to pay.
My friend or relative has died in the bushfires. What happens to their debt?
The debt of your deceased friend or relative will be paid from their estate. An estate includes things like money, property and anything else owned by a deceased person. If the estate is not big enough to cover all of the debts, the debts remain unpaid. If you are a co-borrower with a deceased person, the creditor is likely to require you to pay all of the debt. Contact the Consumer Action Law Centre for legal advice.
What if I disagree with the amount I owe?
If you disagree with the amount of a debt owing under a loan you should apply to the relevant dispute resolution scheme (see above).
This should stop your creditor starting any legal action.
If the debt is a credit card, personal or home loan, the lender has a legal requirement to provide you with statements of account showing the amount owing.
If you dispute a debt to a utility company, you may complain to the Energy and Water Ombudsman and the Telephone Industry Ombudsman will handle a complaint about a disputed telephone debt.
Where to get help
Consumer Action Law Centre
Tel: 1300 881 020 or 9629 6300 (Legal advice), Monday to Friday, 9.30 am to 5 pm, or email advice@consumeraction.org.au, www.consumeraction.org.au
Consumer Affairs Victoria
Tel: 1300 558 181, Monday to Friday, 8.30 am to 5 pm, www.consumer.vic.gov.au
Financial Ombudsman Service
Tel: 1300 780 808 (General) and 1800 337 444 (Bushfire and Flooding Disaster Hotline), Monday to Friday, 9 am to 5 pm
Email: GIDisaster@fos.org.au, www.fos.org.au
Credit Ombudsman
Tel: 1800 138 422, Monday to Friday, 9 am to 5 pm, www.creditombudsman.com.au/
Victorian Civil and Administrative Tribunal
Tel: 9628 9700 (General) and 1800 001 099 (Bushfire Information Line), Monday to Friday, 9 am to 4.30 pm, Email: vcat@vcat.vic.gov.au (add ‘Bushfire priority’ into your subject header), www.vcat.vic.gov.au
Department of Human Services (DHS)
Tel: 1800 050 400 (Victorian Bushfire Case Management Service), Monday to Friday, 8 am to 5 pm and tel: 1800 240 667 (Victorian Bushfire and Storm Information Line), Monday to Friday, 8 am and 6 pm, www.dhs.vic.gov.au/em/bushfire-recovery
Counselling and support
NURSE-ON-CALL Bushfire Health and Counselling Line: 1300 606 024, seven days, 24 hours a day
Beyond Blue: 1300 224 636, seven days, 24 hours a day, www.beyondblue.org.au
Interpreters – Translating and Interpreting Service (TIS)
Tel: 131 450, seven days, 24 hours a day
Hearing impairment – National Relay Service
Tel: 133 677 (TTY service) and 1300 555 727 (Speak and listen), seven days, 24 hours a day
Other resources
See the 2009 Bushfire Legal help Handbook and factsheets on Utilities, Employment and small business and Family law.