Dealing with Debt Collectors ... Small Claims Court and Procedure ... Statutory Demands ...

Disputing a Debt

Creditors, their lawyers and Debt collectors sometimes do make mistakes.  You have a right to dispute a debt if you do not agree with the amount that you are being asked to pay or you do not think you have a debt.

‘I thought that debt had been paid!’

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Contact the creditor or the debt collector in writing, and advise them that the debt has already been paid. Make sure you provide copies of any records or information which proves you have paid the debt. You should also ask the debt collector why they are contacting you. If the collection activity continues without an adequate explanation, make a complaint.

‘I don’t think I owe that much!’

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Request an itemised statement of your account that clearly sets out the amount you owe, how it was calculated, any payments that you have made and details of fees and charges applied. Check the statement carefully. It might include recovery fees or expenses charged by the debt collector. Check whether you have to pay these and get advice if you think the fees are unfair.

‘That is not my debt!’

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If you are approached about a debt which you know nothing about, it may be a simple case of mistaken identity. Showing your driver's licence or other proof of identity may resolve the situation. However, the decision to show identity is yours—you cannot be forced to do so by a debt collector.

If you think someone has misused your identity to run up debts in your name, contact the creditor and your financial institution immediately. You should also ask for a copy of your credit report to make sure no other fraudulent transactions have been made in your name. 

Are you responsible for someone else's debt?

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You are generally not legally responsible for paying another person's debts unless you have agreed to be a co-borrower or guarantor for a loan. Think carefully before you agree to do this—if the person defaults on their repayments, you could be legally responsible for the full amount of the debt.
 
Get advice if you were pressured into agreeing to be a co-borrower or guarantor, if you did not understand the commitment you were making or if you felt threatened in any way. 

Are you being taken to court?

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Creditors have the right to sue you to recover money owed to them. If you receive notice that you are being taken to court (such as a summons or statement of claim/liquidated claim), you should get advice immediately.

If you are sure that you owe the amount claimed, pay the amount in full now if you can. If you cannot pay the full amount think about applying, within any timeframe allowed, to pay by instalments. You can arrange this with the court staff.

Get legal advice immediately if you disagree with the debt because you think you do not owe the amount claimed, owe a different amount, or have a valid defence.

A defence is a legal reason why a debt cannot be enforced by a court. For example, there are laws that stop debts being collected through the courts after a certain period of time.

If you have a defence against paying the debt, you will need to file documents with the court. You should get legal advice before doing this.

Remember: you might still be able to negotiate a repayment plan, even if a court order has been made against you.

What about old debts?

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If you are contacted about a debt that is several years old, do not confirm the debt or make a payment until you get independent advice. You may have a defence against a debt if:

  • a long period of time has passed since you last made a payment or confirmed the debt, and
  • no court action has been taken to recover the debt in the meantime.

Generally, you can rely on this defence if 6 years have passed since you last made a payment or confirmed the debt, and there is no court judgment against you.

If this is the case, recovery of the debt through the courts is said to be 'statute-barred' and the courts will not enforce the debt. If you think a debt collector is contacting you about a debt that is 'statute-barred', you should get legal advice before you make any payment or confirm the debt in any other way.