Frequently Asked Questions
What's a debt?
1. I signed a contract without reading it. Is the contract still valid?
A contract can be valid even if you have not read the terms. Once a contract is signed, it can be very difficult to terminate it. If you do not do what the contract says, the other party may make a claim against you for breaching the contract.
If you have signed a contract and you want to terminate it, you should get legal advice.
Fore more information, see Contracts.
2. I gave my daughter $2,000 to help pay her bills. It's been eight months and she still hasn't paid me back. What can I do?
It is common for family members to help each other out financially. Sometimes, it can be difficult to prove the intention of the person giving the money and whether it was meant to be a gift or a loan. For more information, see Gifts and private loans.
3. I cannot afford to pay my home loan. Is there anything I can do to save my home?
If you are having problems paying your home loan, you should:
- speak to a free financial counsellor
- contact your lender and apply for a hardship variation
- apply to an external dispute resolution (EDR) scheme.
If you stop making repayments on the home loan, your lender can send you a default notice. If you ignore the default notice, your lender can take legal action against you to repossess (take) your home to repay the loan.
For more information, see Loans and credit cards.
If you have been served with a statement of claim for an unpaid credit card, personal loan or home loan debt, see Resolving your dispute with the bank or credit provider.
Making a claim
1. What details do I need before I send a letter of demand?
If you are making a claim against an individual person, you will need their first and last names and their correct address. If it is a claim against a business or company, you can do a business name search through the ASIC website.
It may be difficult to recover money owed to you if you don't have all of the other party's details.
There are a number of ways to find out the name and address of a person or business.
For more information, see Identify the other party.
2. How do I write a letter of demand?
You can send a letter of demand to a person that owes you money. A letter of demand should include details about:
- how much money is owed to you
- why it is owed
- when the money should have been paid
- how long the debtor has to pay it.
The letter of demand should also explain that you intend to start a court case to recover the debt. For more information on writing a letter of demand, see Letter of demand.
3. I loaned a friend $5,000 and now he says he will not pay me back. Can I take him to court?
It is quicker and cheaper to try to fix the problem without going to court, if you can. You could write a letter of demand, negotiate with the other party or try free mediation through Community Justice Centres. For information on these options, see Resolving your dispute.
If you have sent them a letter of demand and they still have not paid you, you may want to consider starting a case in the Local Court. Before you start a court case you should consider whether it is worth going to court. For more information, see Should you go to court.
Before you start a court case, you should get legal advice about the strength of your case. If you lose your case, you will usually have to pay the other party's costs.
Responding to a claim
1. I have received a letter of demand. What should I do now?
A letter of demand is a letter asking that you pay a debt by a particular date. The letter will usually threaten legal action if the money is not paid.
You have options when you receive a letter of demand. You could:
- admit that you owe some or all of the money and try to come to an agreement for payment
- deny that you owe the money
- ask for further information about the debt.
For help with what to do when you get a letter of demand, see Responding to a letter of demand – debt.
2. Someone is chasing me for a debt I'm not sure I owe. How can I get more information?
If the letter of demand does not explain why you owe the debt, you could write to the creditor to ask for more information. This is called asking for further and better particulars.
You should not admit you owe the debt if you are not sure whether or not you owe it.
For more information, see Responding to a claim and Sample letter asking for more information.
Resolving your dispute
1. How can I resolve a dispute without going to court?
There are a number of ways you can try to resolve your dispute without going to court. Some of the most effective ways to resolve a dispute is to negotiate with the other party, or arrange for an independent person to assist you both through a process called 'mediation'.
For more information about your options, see Resolving your dispute.
2. We have reached an agreement to settle the matter. What should I do now?
If you have settled (resolved) your dispute, it is a good idea to put the agreement in writing. Written agreements are often called 'terms of settlement' or a 'settlement agreement'. The agreement should include details of the amount of the debt, method of payment and the date it will be paid by. The agreement should also be signed and dated by both parties.
You should get legal advice if you need help writing an agreement, or if you are given an agreement to sign.
For more information, see Put it in writing.
3. I am having problems paying my credit card debt. My application for a hardship variation has been refused. What can I do to resolve my dispute with the bank?
An application for a hardship variation is often called a hardship notice.
The bank must respond to your hardship notice within a set period of time. If they refuse your hardship notice, they have to tell you why and give you the details of the external dispute resolution (EDR) scheme you can complain to.
It is a good idea to speak to a free financial counsellor who can assist you through this process.
For more information, see Resolving your dispute with the bank or credit provider.