Credit and Debt

Credit and Debt

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What are your client’s options?

What options are available to your client will depend on what stage the matter is at, as well as your client’s circumstances, the type of debt and what outcome is most appropriate for your client.

First, you need to inform the creditor that you are acting and try to get further enforcement (including commencement of proceedings or repossession) put on hold. You can then consider your clients options, which will include:

  • Applying for hardship programs - in relation to a consumer credit contract, your client may be eligible for a hardship variation to help them find their feet in the short term. Utilities and telecommunications providers are also required to have hardship programs in place in respect of gas, water, electricity, mobile phone, landline and internet contracts. The government also provides utility relief grants for clients experiencing hardship and having temporary difficulty paying the gas, electricity and water bills as a result of a short term crisis.
  • Dispute resolution or negotiation - your client's instructions and circumstances will determine whether negotiation with the creditor's hardship team or dispute resolution is more appropriate:
    • Negotiation - if your client is judgment proof (and is willing to rely on this), you should first confirm whether the creditor you're dealing with has agreed to participate in the Bulk Negotiation Project. If the creditor is not part of the Bulk Negotiation Project, you can negotiate on a case-by-case basis, including (subject to the client's instructions), by pushing for waiver or reduction of the debt or a manageable payment plan. Negotiation may still be an option after a court order has been made, particularly if the creditor has not previously been made aware of your client's hardship;
    • Dispute resolution - both internal and external dispute resolution mechanisms are mandatory under the National Credit Act (in relation to consumer credit). The Telecommunications Industry Ombudsman and the Energy and Water Ombudsman (Victoria) can also make binding decisions in relation to their industry members. These avenues should be exhausted before proceeding to court. These External Dispute Resolution schemes are less complex, low risk, no cost options for our client group. Dispute resolution may be more appropriate for your client than negotiation based on their hardship if:
      • your client disputes the debt (for example, on the basis that, it is not their debt, they have already paid it or it is not for that amount); or
      • there were features of the creditor's conduct or of the transaction or agreement which may amount to a defence (refer to the table of possible defences in Going to Court - Making and Defending Claims.
  • Defending litigation - it is possible that the creditor will sue your client to recover the debt. You will need to consider whether any defences are available to your client. Your client will need to weigh up the consequences of not defending the claim (including potentially bankruptcy and a record on their credit report) against the increased enforcement costs and potential cost consequences of defending the claim. If the litigation is still in the early stages (for example, nothing other than a defence has been filed), it may be possible to have the dispute transferred to either the relevant EDR scheme or to VCAT (only for general consumer disputes) to minimise the potential costs consequences of defending the claim.
  • Relying on the client being judgment proof - in the event that the client is judgment proof, and providing that you have made them aware of the consequences of having judgment entered against them, the client may choose to do nothing (i.e. not defend the claim against them) and to rely on the fact that the judgment cannot be enforced against them. Ideally, we would negotiate with the creditor on the basis of the client being judgment proof, rather than relying on it once judgment has been made.
  • Bankruptcy - bankruptcy can come about in two ways (i) the creditor can apply to make your client bankrupt; or (ii) your client can voluntarily go bankrupt. The consequences of bankruptcy are set out in the Bankruptcy section.