What happens when you don’t pay your debts?

Failure to pay debts, including credit cards, mortgage, car loan re-payments and utilities such as electricity and phone can have long-term consequences. In most cases, credit and service providers will endeavour to recover any debt owing to them. Here is what you can expect if you have payments in arrears.

1. Debt Recovery

If your debt is 60 days or more in arrears, the credit or service provider may appoint a debt collector to recover the debt.

A debt collector may contact you to:

  • Provide information about your account
  • Demand payment from you or explain the consequences of non-payment
  • Offer to settle your account, make alternative payment arrangements, or review existing arrangements
  • Inspect or recover mortgaged goods (if they have a right to do so)

If you have not responded to previous attempts to contact you, or not kept to an agreed repayment plan, a debt collector can contact you to find out why.

2. Dealing with Debt Collectors

If you are contacted by a debt collector is it important to be honest and co-operative throughout all stages of the debt recovery process. It is also important that the debt collector treats you fairly. It is against the law for a debt collector to behave in the following ways:

  • Threatening, trespassing or intimidating
  • Harassing or verbally abusive
  • Making false or misleading statements or engaging in deceptive conduct

For more information on dealing with debt collectors, download this fact sheet: https://www.moneysmart.gov.au/media/558502/dealing-with-debt-collectors.pdf

3. Repossession

If the loan is secured on an asset such as your car or house a lender may take action to repossess that asset. Once you’ve missed a payment, a lender must issue you a default notice and then give you 30 days following the date of issue to pay the overdue amount before taking steps to repossess the asset.

4. Credit History

Outstanding debts more than 60 days old will be included on your credit history for five years – even if you pay the debt after the 60 days. If your provider has not been able to contact you to request payment, the debt will be reflected on your credit history for seven years. This in turn will lower your credit score and may impact your ability to borrow money in the future.

Do you need help dealing with debt? Contact us at Hunter Lending Solutions to arrange a confidential chat.