Options before legal action

Get help with utility bills

If you are having financial difficulty or hardship you may be able to get government help to pay your current gas, water and electricity bills. Ring your utility company and ask if you can get a utility relief grant.

Change the contract

You may be able to ask for a credit contract to be changed because of hardship or because the contract is harsh or unfair. Ask the creditor first. If they refuse you may be able to apply for an order that will give you more time to pay or let you pay bit by bit, in instalments. You may need legal advice.

Question the debt

Creditors can make mistakes. You may need to talk with the creditor if you:

• agree that you owe the debt but do not agree with the amount
• are being asked to pay someone else’s debt
• have already paid the debt (you may need to show proof)
• do not think the debt is yours at all.

If you disagree with a debt get legal advice fast to work out what your options are. Also see Reasons you might not have to pay.

When you speak to the creditor, it's important to:

• have a pen and paper ready to write down what they say
• ask if they have a specialist hardship person you can talk to
• write down the name of the person you are talking with
• always write down the date, time and what was said
• have all the details of your situation ready – for example, dates of payments made
• be honest about your financial problems.

Negotiate with the creditor

You might agree that you owe the debt but cannot pay it off all at once. Tell the creditor you are in hardship. You can try to negotiate with the creditor by asking to pay at a later date, or pay in instalments.

Make sure that your repayment plan is realistic – do not commit to a plan if you think you might still have trouble paying. It is a good idea to get help to write a repayment or instalment plan from a financial counsellor or community legal centre. You can then give this to the creditor and ask them to consider it.

Your plan should set out repayments you can afford and you can ask for interest to be stopped.

Keep in mind that even if your plan is reasonable, your creditor can still say no. This is why it is worth asking for a hardship variation first. If the creditor does refuse, they may take action to get the money owed, so get legal help.

What if I do nothing?

This can seem like the easiest option. However, if you ignore a debt, you will probably still get the calls and the letters and eventually a court order against you, whether you owe the money or not. The debt is also likely to get bigger, with costs and interests added.

If there is security for the debt

If you cannot repay a debt the creditor will be able to repossess any goods used as security and sell them. Creditors usually get court orders first if the security is over property, such as your home. If your debt has not been fully paid off by the sale, you will still owe money. The creditor will then take other action to get the money.

You may have borrowed money to buy a house, or used your house as security for other loans. If you cannot pay back this money the creditor can sell your home. Any other creditor can sell your home if they get a court order.

If your home is at risk, get help fast.

There are some things you can do that may help:

• talk to the creditor and explain your situation. The creditor may agree to a repayment plan
• ask the creditor in writing for a hardship variation. If this is refused, you may be able to apply to have your payments reduced or suspended for a short time. Get legal advice or see a financial counsellor to help you do this
• contact the Department of Families, Fairness and Housing. They may offer short-term help if you are having trouble paying off your mortgage
• talk to a financial counsellor for options about mortgage repayments
• contact your superannuation scheme to ask about hardship release of funds to cover overdue payments.

If there is a co-borrower or guarantor

In some cases, the creditor will ask a co-borrower or guarantor to pay all or some of your debt. A co-borrower is someone who has borrowed the money with you and agrees to be equally responsible for the debt. A guarantor is someone who has said on the contract that they will pay your debt if you cannot.

If you cannot pay, the co-borrower or guarantor may have to pay, or they can lose assets.

Other support

Find out how you can get other support for debt and financial issues.