What if the family can't repay their debts?

If the family is experiencing difficulty repaying debts, or have multiple debt, quick action will be in their best interest. As repayments fall behind the amount of interest owed can build up very quickly. It will be easier to make arrangements before any legal action has commenced.

Sometimes creditors will be willing to renegotiate the amount of the regular payment if they can see that this offers the best chance of repayments being made.

Sample letters for requesting negotiations are available at : www.cclcnsw.org.au

Be aware that these may not meet legal requirements outside NSW.

There are provisions in the Consumer Credit Code for variations to repayments to personal loans in the case of hardship. Hardship could include illness, unemployment or a family member going to prison. Even if the creditor does not want to negotiate, it may be possible to get a hardship variation ordered.

For more information, talk to a financial counsellor, community legal centre or the Fair Trading Department in your state.

Debt consolidation is sometimes promoted as the answer to debt. This means combining all a person’s debts, and taking out one loan to cover payment. Although this can look like a good idea, it’s important to consider this carefully.
Be cautious about commercial organisations promoting debt consolidation products, as there may be other options that will be more beneficial for the family. 

Check the ASIC (Australian Securities Investment Commission) advice about debt consolidation here:

For significant debts families should always get financial counselling or independent legal advice (eg from a community legal centre) where:

  • They may not be responsible for the debt eg if it is an ex-partner’s debt

  • They may have been tricked into a financial arrangement, or the arrangement appears to have been very unfair

  • They are being taken to court

  • They are considering bankruptcy.

To find a financial counsellor go to:http://www.afccra.org/counselling.htm

For a directory of community legal centres go to: http://www.naclc.org.au