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09-06-2009, 08:35 AM
Consumer Affairs Victoria
Financial Services Factsheet
Must I pay?
May 2005
Ordinarily, the best thing to do if you owe money is to try to repay the
loan. However, there are times when, although you legally owe a debt,
the law may excuse you from repaying it. Before acting on the brief
information given here, you will need to discuss your situation with a
financial counsellor and/or a community legal centre.
Need more
information?
Call Consumer
Affairs Victoria
Helpline on
1300 55 81 81.
Social SecurityRecipient
If your sole source of income is a
Centrelink pension (because you
have reached retirement age, are
unemployed or have a disability),
a court will not order that you
repay a debt from your pension.
See section 12 of the Judgment
Debt Recovery Act 1984 (Vic).
If your sole source of income is
a Centrelink pension and you
have no significant assets (for
example savings or your own
home) then you are “judgment
proof”.
In other words, even if
a credit provider obtains a court
judgment or order that you owe
the money, you cannot be made
to pay from your Centrelink
pension. If your financial
circumstances change (for
example you get a job or receive
an inheritance) a credit provider
may be able to recover the debt
owed. After a court order or
judgment is obtained a credit
provider has 15 years to recover
the debt.
www.consumer.vic.gov.au
www.consumer.vic.gov.au
1300 55 81 81
Financial Services Factsheet
Here is a sample letter you can
send to a credit provider or debt
collector in circumstances where
you have no significant assets,
your sole source of income is
from Centrelink and you are
unable to repay.
[Insert date]
Dear Credit Provider/Debt Collector
I refer to your letter of [date]
requesting repayment of $[amount]. I
am in receipt of a social security
benefit which is my sole source of
income. I have no assets other than
ordinary household items.
As you may be aware, should you
issue legal proceedings against me,
a court will not make an instalment
order (see the Judgment Debt Recovery
Act 1984, section 12).
I enclose a copy of my pensioner
card for your information.
Please do not contact me again
concerning this debt. Should you
do so, I can complain to
Consumer Affairs Victoria
of harassment.
Yours sincerely,
[your name]
Bankruptcy
If you have limited assets and
cannot afford to meet your debts
you may wish to consider
bankruptcy.
There are many advantages and
disadvantages to bankruptcy, so
before you make any decisions it
is important you seek
independent advice from a
financial counsellor or the
Insolvency and Trustee Service of
Australia (ITSA), who can assess
your particular circumstances.
The primary advantage of
bankruptcy is that it cancels most
of your debts, giving you the
opportunity of a fresh start. Your
bankruptcy will be listed on your
credit report for seven years.
Debts not cancelled by
bankruptcy include:
• debt obtained by fraudulent
means
• child support payments
• court fines (including PERIN
Court fines)
• debts incurred after the date of
bankruptcy
• unliquidated damages
(claims for payment of
damages – for example arising
from negligence in a motor
vehicle accident – where the
amount owed has not yet been
decided by a court or a formal
agreement with the other
party).
Quick Tip
Do not rely on
a debt collector
telling you that
a court order
(judgment) has
been made –
ask for a copy
of the order and
phone the court
to confirm the
judgment.
Page 2 of 4
Financial Services Factsheet
Quick Tip
Do not rely on
a debt collector
telling you that
you have an
outstanding
debt. If you
cannot
remember the
debt ask for
proof that the
account is
outstanding
and belongs to
you.
During the period of your
bankruptcy (usually three years)
if your income reaches a certain
threshold you may have to pay
contributions to your trustee.
The threshold increases with the
number of dependants and is
indexed twice a year. For further
information contact a financial
counsellor, ITSA or Consumer
Affairs Victoria.
Remember: If you have given a
credit provider security (a
mortgage) over any of your
possessions (most often your
home or car), the credit provider
has the right to sell the secured
goods (only if you have defaulted
on the loan), but if there is
money owing after the sale,
bankruptcy will clear that debt.
Old Debts
If you have made no payments
and have not acknowledged in
writing that you owe a debt for a
period of six years (fifteen years
where there is a mortgage over
property or a court order to
repay), then you may not have to
pay the debt. While a credit
provider can still start court
proceedings, you will have a
complete defence.
If you acknowledge in writing
that you owe the money, (for
example, by admitting, yes I owe
it but nobody's asked me about it
for the last 10 years) it has the
effect of re-starting the six year
time limit. Therefore, it is
important not to acknowledge a
debt in these circumstances
unless you intend to, and can
repay it.
Page 3 of 4
Financial Services Factsheet
Date of Issue:
May 2005
Here is a sample letter you can
send to a credit provider or debt
collector when the debt has not
been acknowledged by you for
the relevant time (six or fifteen
years).
[Insert date]
Dear Credit Provider/Debt Collector
I refer to your letter/phone call of
[date] demanding payment. I do not
acknowledge that I am liable for the
debt. I note that the last payment
was made on [date].
As you may be aware, pursuant to
the Limitations of Actions Act 1958
s.5(1)(a) you are out of time to issue
proceedings.
If you should issue legal proceedings,
I will defend on the grounds that
your claim is statute barred.
Please do not contact me further
concerning this debt. Should
you do so, I can complain to
Consumer Affairs Victoria.
Yours sincerely,
[your name]
Further information
For further information, contact
Insolvency and Trustee Service
Australia (ITSA), or get a copy of
‘Weighing It Up’ from Victoria
Legal Aid or Consumer Affairs
Victoria’s fact sheet – Debt
collectors – your rights in Victoria.
More information
Information on financial services
is available from:
Consumer Affairs Victoria
Victorian Consumer &
Business Centre
113 Exhibition Street
Melbourne 3000
Telephone: 1300 55 81 81
Website www.consumer.vic.gov.au
Further reading
Consumer Affairs Victoria has a
range of financial services related
fact sheets:
• Borrowing money
• Comparison rates decoded
• Credit cards
• Dealing with credit problems
• Debt collectors: your rights
in Victoria
• Finance brokers
• Investment seminars and get
rich quick schemes
• Pay day lenders and the
Consumer Credit Code
• Mortgage minimisation
• My credit report
• Repossession of your goods
• Tied contracts
• Vendor terms contracts
The information contained in this fact sheet is of a general nature only and should not be
regarded as a substitute for a reference to the legislation or professional advice.
Authorised by the Victorian Government, 121 Exhibition Street, Melbourne, Victoria, 3000.
Financial Services Factsheet
Must I pay?
May 2005
Ordinarily, the best thing to do if you owe money is to try to repay the
loan. However, there are times when, although you legally owe a debt,
the law may excuse you from repaying it. Before acting on the brief
information given here, you will need to discuss your situation with a
financial counsellor and/or a community legal centre.
Need more
information?
Call Consumer
Affairs Victoria
Helpline on
1300 55 81 81.
Social SecurityRecipient
If your sole source of income is a
Centrelink pension (because you
have reached retirement age, are
unemployed or have a disability),
a court will not order that you
repay a debt from your pension.
See section 12 of the Judgment
Debt Recovery Act 1984 (Vic).
If your sole source of income is
a Centrelink pension and you
have no significant assets (for
example savings or your own
home) then you are “judgment
proof”.
In other words, even if
a credit provider obtains a court
judgment or order that you owe
the money, you cannot be made
to pay from your Centrelink
pension. If your financial
circumstances change (for
example you get a job or receive
an inheritance) a credit provider
may be able to recover the debt
owed. After a court order or
judgment is obtained a credit
provider has 15 years to recover
the debt.
www.consumer.vic.gov.au
www.consumer.vic.gov.au
1300 55 81 81
Financial Services Factsheet
Here is a sample letter you can
send to a credit provider or debt
collector in circumstances where
you have no significant assets,
your sole source of income is
from Centrelink and you are
unable to repay.
[Insert date]
Dear Credit Provider/Debt Collector
I refer to your letter of [date]
requesting repayment of $[amount]. I
am in receipt of a social security
benefit which is my sole source of
income. I have no assets other than
ordinary household items.
As you may be aware, should you
issue legal proceedings against me,
a court will not make an instalment
order (see the Judgment Debt Recovery
Act 1984, section 12).
I enclose a copy of my pensioner
card for your information.
Please do not contact me again
concerning this debt. Should you
do so, I can complain to
Consumer Affairs Victoria
of harassment.
Yours sincerely,
[your name]
Bankruptcy
If you have limited assets and
cannot afford to meet your debts
you may wish to consider
bankruptcy.
There are many advantages and
disadvantages to bankruptcy, so
before you make any decisions it
is important you seek
independent advice from a
financial counsellor or the
Insolvency and Trustee Service of
Australia (ITSA), who can assess
your particular circumstances.
The primary advantage of
bankruptcy is that it cancels most
of your debts, giving you the
opportunity of a fresh start. Your
bankruptcy will be listed on your
credit report for seven years.
Debts not cancelled by
bankruptcy include:
• debt obtained by fraudulent
means
• child support payments
• court fines (including PERIN
Court fines)
• debts incurred after the date of
bankruptcy
• unliquidated damages
(claims for payment of
damages – for example arising
from negligence in a motor
vehicle accident – where the
amount owed has not yet been
decided by a court or a formal
agreement with the other
party).
Quick Tip
Do not rely on
a debt collector
telling you that
a court order
(judgment) has
been made –
ask for a copy
of the order and
phone the court
to confirm the
judgment.
Page 2 of 4
Financial Services Factsheet
Quick Tip
Do not rely on
a debt collector
telling you that
you have an
outstanding
debt. If you
cannot
remember the
debt ask for
proof that the
account is
outstanding
and belongs to
you.
During the period of your
bankruptcy (usually three years)
if your income reaches a certain
threshold you may have to pay
contributions to your trustee.
The threshold increases with the
number of dependants and is
indexed twice a year. For further
information contact a financial
counsellor, ITSA or Consumer
Affairs Victoria.
Remember: If you have given a
credit provider security (a
mortgage) over any of your
possessions (most often your
home or car), the credit provider
has the right to sell the secured
goods (only if you have defaulted
on the loan), but if there is
money owing after the sale,
bankruptcy will clear that debt.
Old Debts
If you have made no payments
and have not acknowledged in
writing that you owe a debt for a
period of six years (fifteen years
where there is a mortgage over
property or a court order to
repay), then you may not have to
pay the debt. While a credit
provider can still start court
proceedings, you will have a
complete defence.
If you acknowledge in writing
that you owe the money, (for
example, by admitting, yes I owe
it but nobody's asked me about it
for the last 10 years) it has the
effect of re-starting the six year
time limit. Therefore, it is
important not to acknowledge a
debt in these circumstances
unless you intend to, and can
repay it.
Page 3 of 4
Financial Services Factsheet
Date of Issue:
May 2005
Here is a sample letter you can
send to a credit provider or debt
collector when the debt has not
been acknowledged by you for
the relevant time (six or fifteen
years).
[Insert date]
Dear Credit Provider/Debt Collector
I refer to your letter/phone call of
[date] demanding payment. I do not
acknowledge that I am liable for the
debt. I note that the last payment
was made on [date].
As you may be aware, pursuant to
the Limitations of Actions Act 1958
s.5(1)(a) you are out of time to issue
proceedings.
If you should issue legal proceedings,
I will defend on the grounds that
your claim is statute barred.
Please do not contact me further
concerning this debt. Should
you do so, I can complain to
Consumer Affairs Victoria.
Yours sincerely,
[your name]
Further information
For further information, contact
Insolvency and Trustee Service
Australia (ITSA), or get a copy of
‘Weighing It Up’ from Victoria
Legal Aid or Consumer Affairs
Victoria’s fact sheet – Debt
collectors – your rights in Victoria.
More information
Information on financial services
is available from:
Consumer Affairs Victoria
Victorian Consumer &
Business Centre
113 Exhibition Street
Melbourne 3000
Telephone: 1300 55 81 81
Website www.consumer.vic.gov.au
Further reading
Consumer Affairs Victoria has a
range of financial services related
fact sheets:
• Borrowing money
• Comparison rates decoded
• Credit cards
• Dealing with credit problems
• Debt collectors: your rights
in Victoria
• Finance brokers
• Investment seminars and get
rich quick schemes
• Pay day lenders and the
Consumer Credit Code
• Mortgage minimisation
• My credit report
• Repossession of your goods
• Tied contracts
• Vendor terms contracts
The information contained in this fact sheet is of a general nature only and should not be
regarded as a substitute for a reference to the legislation or professional advice.
Authorised by the Victorian Government, 121 Exhibition Street, Melbourne, Victoria, 3000.