Recently, we talked about dealing with debt collectors and provided you with some useful information on your rights and responsibilities. But what about if your dealings with debt collectors were to go that one step further? What about legal action?
Today, we explain what legal action your creditors can take against you and what you can do about it.
Let’s start from the beginning.
When you owe a creditor money
Should you fall behind on your loan, credit card, or a bill and are reluctant to communicate with the service provider or respond to them, a debt collector may contact you. The debt collector could be the original credit or service provider collecting the debt themselves or a debt collection agency acting on the creditor’s behalf.
Often, you work with the creditor or debt collection agency, to decide on a payment plan, or come to some sort of agreement. However, if you are still unable to pay your debt, refuse to cooperate, or do not return calls or correspondence, the creditor or debt collection agency can take you to court.
When it’s time for court
Creditors have the right to start legal action proceedings to recover the money you owe – in other words, they can sue you for the debt. If they do, these legal proceedings will be civil rather than criminal, and will have nothing to do with the police or the possibility of jail.
If you receive a court notice for legal action (such as a summons, statement of claim or liquidated claim), your first step should be to see whether an External Dispute Resolution (EDR) scheme can help you deal with your dispute.
Defaults, final demands, overdue accounts
External dispute resolution (EDR) scheme
So, what is an EDR scheme?
Almost all financial services, energy, water and telecommunication businesses belong to an EDR scheme. EDR schemes hear complaints for free and can be a simpler alternative to resolving disputes in court. As well as contacting an EDR, it is extremely important to seek legal advice as soon as possible!
Where to go for legal advice
As we all know, lawyers can be very expensive. In Australia, we are very lucky to have access to community legal centres and Legal Aid agencies that offer free legal advice, which can help with disputes and debt recovery through the courts. Visit ASIC Money Smart for a list of contacts.
Ignoring your legal action notice
It is of course extremely important not to ignore a legal action notice. If you do, a judgement may be entered against you, and the creditor or debt collection agency may obtain a court order from to repossess some of your property or goods.
Creditors can usually seize and sell any property used as security for the loan or credit. This is unless you have repaid more than $10,000 or 25% of the amount of credit under the contract, in which case the creditor needs a court order to repossess the goods.
What creditors can’t do
Legally, a creditor cannot:
- Have you sent to prison
- Take or sell any of your property that they don’t hold a security over. (Unless they have a court order)
- Threaten, physically intimidate or harass you (nor can they have their agents do this).
If you want to know more about what creditors and debt collection agencies can and can’t do, read our recent blog post ‘Dealing with Debt Collectors – Your rights and responsibilities.’
At Life After Debt® we have offices in Perth and Sydney; we can help you reduce unmanageable debt by accessing affordable, practical debt solutions once lending is no longer available to you.
Do you want today to be the day you finally get some debt relief?
Contact us today to receive honest and sympathetic advice, without judgement.
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