Reasons You May Not Need to Pay a Debt

You may not have to pay a debt for a number of reasons:

  1. You dispute the debt
  2. Your only income source is Centrelink or WorkCover
  3. Your debt is older than a set period of time
  4. You are, or may become, bankrupt
  1. You dispute the debt

You may disagree that you owe any money. You may not have to pay if you agreed to a contract, but:

  • You were told something that was not true (you were misled into signing)
  • You were forced to sign or were taken advantage of (even by a family member)
  • The lender has broken a law.

If you disagree with the debt, or you think a law may have been broken by the lender, contact Anglicare Victoria’s financial counselling service. You may only have a short time to act.

  1. Your only income is from Centrelink and you don’t have significant assets

If your only income is from a Centrelink payment, a court will not make you repay your debt from this income. WorkCover payments are usually protected too.

You might also be ‘judgment-proof’. This is where your only income is a Centrelink or WorkCover payment, and:

  • You do not own outright or have a mortgage on a house
  • You do not own significant assets, such as a second car, savings or expensive antiques
  • You own one registered car worth less than $8,000.

However, if your income is protected but you decide to apply for an instalment order at court then you lose this protection.

  1. Your debt is too old

You may not have to pay an old debt if it has been at least six years since you:

  • Made payments on the debt
  • Said in writing that you owe the debt
  • Had any court orders made against you.

The period is 15 years, not six years, where:

  • The debt is secured by a mortgage over property
  • There is already a court order to repay (judgement has been entered).

Debts that are too old to collect are called ‘statute barred’. Please refer to Fact Sheet 6 ‘Do I have to pay an old debt?’ for more information and how to get help if the creditor asks you to pay an old debt.

  1. You are or may become bankrupt

You may choose to become bankrupt if:

  • You have significant debt and you have explored all options available to you with a financial counsellor
  • You have a clear understanding of the consequences of bankruptcy ─ and what debts can and can’t be included
  • You qualify for bankruptcy.

Bankruptcy gives you a legal right to protection from your creditors. A bankruptcy trustee takes control of most of your debts and significant assets. Not all debts will be cancelled by bankruptcy.

If you think you don’t have to pay due to one or more of the above reasons, contact a financial counsellor from Anglicare Victoria for assistance in what to do next.

Not paying a debt can still have consequences, especially if you don’t pay because you are ‘judgement proof’. And not all debt can be included in a bankruptcy. Acknowledging a debt that is near to being statute barred will mean the creditor has another six or 15 years to pursue the debt.