Last updated 3 August 2016
If there is a dispute about whether a debt is owed or how much is owed, write a letter to explain the dispute.
If there is no dispute that a debt is owed, try to negotiate payment on terms that are affordable.
Be prompt and courteous in correspondence about debts. Keep copies of all correspondence sent and received about a debt.
Debt collectors must not act in an unreasonable or harassing way. If this occurs, there is a way to make a complaint about a debt collector’s behaviour (see Harassment by Debt Collectors).
Understanding some of the legal terminology about debts can assist if there is a dispute about whether money is owed to another person:
- A debt is created when one person owes money to another.
- A debtor is a person who owes money. A creditor is a person who is owed money.
- Generally, one person will not be legally responsible for another person’s debt, even when that other person is their spouse, partner or child. However, if a person who enters into a joint debt with another or is the guarantor for the debt of another, they may take on legal responsibility for that debt. It is important to get legal advice about the obligation to pay another person’s debt.
- A debt must be for a fixed amount or for an amount that can be precisely calculated. This is known as a liquidated debt.
Chris asks Delia to build a staircase in Chris’s house. Delia agrees to do so for $1000. When the staircase is complete, there is a debt for the agreed amount owing by Chris to Delia of $1000.
Erin asks Frank to build a staircase in Erin’s house without discussing what price Frank will charge. No fixed price has been agreed upon. Frank can claim a reasonable price for the work that has been done. Frank can ask a court to order that there is a debt owing by Erin to Frank.
Civil courts can determine claims for debts and order the payment of interest for late payment and legal costs. In Queensland, civil court proceedings for debts may be issued in the Queensland Civil and Administrative Tribunal, the Magistrates Court, the District Court or the Supreme Court, depending upon the amount of money that is claimed.
If a civil court makes an order that a debt is owing, the order is called a judgment debt. A judgment debt should not be ignored, since non-payment of a judgment debt can result in bankruptcy and can impact on a person’s credit rating. A creditor can petition for the bankruptcy of the debtor as a means of recovering a debt or money order (for more information see the Bankruptcy chapter).
Getting into debt
A person who is overcommitted or temporarily unable to pay their debts should write to the creditor as soon as possible and ask for more time to pay. It may also be possible to arrange for the debt to be paid by instalments.
A person who has entered into a contract to buy goods or services that they cannot afford should write to the contractor to explain that they cannot afford the goods or services and ask that the agreement be ended or varied. The seller is usually under no obligation to accept the goods back or end the contract, but they may agree to do so.
If the goods or services were bought from a door-to-door salesperson, the debtor may have a right to be released from the contract (see the Consumers and Contracts chapter).
It is important to keep copies of all correspondence about the debt.
Purchase of defective goods
If goods are defective, it is a mistake to simply refuse to pay for them.
Consumer protection legislation in Queensland protects people who have been sold defective products (see the Consumers and Contracts chapter). However, a buyer must act promptly to complain about the defective goods and take steps to sort out the problem. Non-action (including non-payment) by the buyer may limit the protections available and the defence of a debt claim.
Complaints about defective goods should be made in writing, and the buyer should request replacement, repair of the goods or cancellation of the sale. Always keep copies of all correspondence about defective goods.
Ombudsman services for debt disputes
When a person has a dispute about a debt relating to banking, utilities or telecommunication services, there are free independent dispute resolution services available through an industry Ombudsman.
Publication of debt information
Information about a person’s slow payment or non-payment of a debt may be supplied to a credit agency.
This information will form part of the person’s credit record and will be disclosed to anyone who enquires at the credit bureau. This can make it harder for the person to obtain credit in the future.
It is possible for a person to check their credit history. If the information on a credit file is incorrect, they can require the information to be corrected (see the Consumer Credit and Banking chapter).