This factsheet is for people who have a debt or who are having trouble with money because they have been affected by a disaster. It explains your legal rights and options, and has the contact details of organisations that can help you.
I am having trouble paying my debts because I have been affected by a disaster. What should I do?
What to do first
Tell your creditor about your situation as soon as possible. A creditor is the person or organisation you owe money to. 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 in 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.
If your debt is a credit card, personal loan or home loan (not a business loan) debt, 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, you may complain to an external dispute resolution scheme. This will be either the Financial Ombudsman Service or the Credit and Investments 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.
You can read more about hardship variations at the Australian Securities and Investments Commission 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.
A financial counsellor can help you work out how to pay back your debt, write up your budget and communicate with creditors. They can also give you names and numbers of other services that may be helpful, such as for family support or for support with gambling or personal problems. Contact Consumer Affairs Victoria (see “Where to get help” below).
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, as well as 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 immediately. Contact Consumer Action Law Centre, which specialises in debt and credit matters, or the Federation of Community Legal Centres. See 'Where to get help' below.
You will only have a short time to act. If you do not put in a defence quickly a court order will be made 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, it is likely a court will also order 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. 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.
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 (as well as 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.
Do I have to make mortgage payments if my house was damaged or destroyed, or if my situation has changed because of a disaster?
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 a change to, or the stopping of, 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 for a hardship variation. Hardship variations do not apply to investment properties. Contact the Consumer Action Law Centre for legal advice. For information on mortgages, see Conveyancing in the Fitzroy Legal Service Law Handbook.
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 due to 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 Department of Human Services 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. 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 apply.
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 13 28 61 to find out how much tax you will have to pay.
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 debt, the lender has a legal requirement to provide you with statements of account showing the amount owing.
If you dispute a debt with a utility company, you may complain to the Energy and Water Ombudsman. The Telecommunications Industry Ombudsman deals with complaints about disputed telephone debts.
Where to get help
Consumer Action Law Centre
Tel: 1800 466 477 or 9629 6300 (legal advice - Victorian residents only), Monday to Friday, 10 am to 1 pm
Consumer Affairs Victoria
Tel: 1300 558 181, Monday to Friday, 9 am to 5 pm
Financial Ombudsman Service
Tel: 1800 367 287, Monday to Friday, 9 am to 5 pm
Credit and Investments Ombudsman
Tel: 1800 138 422, Monday to Friday, 9 am to 5 pm