With more and more people doing it tough with inflation, the ever-increasing cost of fuel, and interest rates creeping up, unfortunately, there are some people that have debts that they will not be able to pay. So, what can you do if you are served with a letter of demand?
The first instinct might be to throw that letter away and try to ignore the debt collector’s phone calls, but that is often the worst thing you could do. The more time it takes to recover a debt, the more interest will be incurred and more than likely added to your bill. The first step is to review the notice and, assuming you agree that you owe the amount claimed, come up with a plan to present to the creditor within the time frame provided as to how you could pay the debt off while still having enough funds left to cover the essentials. For example, you could try to negotiate a payment plan where you pay $x amount per week over a set period. Or you could offer to pay the amount over two or three instalments. It is more than likely going to be in the creditor’s interests to recover the amount owed in a payment plan or instalments than incur the additional costs of court proceedings.
If you just ignore a letter of demand, the next step that will more than likely be taken will be court proceedings commenced against you to not only recover the amount of the debt but also interest and legal costs. If you are served with a Statement of Claim, this is not something you should ignore. A Defence needs to be filed within 28 days or the other party can apply for a default judgement against you and take further action to enforce the judgement such as requiring you to attend court and provide evidence of your financial position, an order to recover amounts from your salary or Centrelink payments, or an order allowing a sheriff’s officer to attend your property and remove items of value to sell to pay the debt owed. You may even find yourself in a position where you will need to apply for bankruptcy. If you disagree with the amount claimed, a Defence should be filed and you should be given the opportunity to attend a mediation to try and reach an agreement with the other party. If an agreement cannot be reached, you will need to defend your position at a hearing. There could be substantial legal fees incurred on both sides that the unsuccessful party will have to pay.
If you are served with a debt collection notice, please don’t just ignore it because it could cost you a lot more in the long run than dealing with it at an early stage.
KC Hilton, WNB Legal