Debt relief in Australia: Is there a government scheme to help with debt?

If you’re struggling with spiralling debt, try not to panic. There are ways to ease your financial hardship and relieve yourself of debt. While having lots of debt can feel overwhelming at times, it’s essential to start a conversation with your creditors, who will be able to help you manage your bills. 

Let’s get to the following commonly asked questions: 

• What is debt relief?
• What qualifies for debt relief?
• Is there a government scheme to help with debt?
• What is the Australian debt relief Program?
• Can Centrelink waive a debt?
• How to get rid of 30k in credit card debt?

Q1. What is debt relief?

Debt relief is a financial plan designed to help you pay off your debt and improve your financial situation. Debt management could involve anything from declaring bankruptcy to taking out a balance transfer credit card to avoid high-interest fees on multiple accounts. 

Note: To successfully take control of your personal finance, you need to understand your current spending habits and start dealing with debt head-on. Check your accounts, and make a list of your bills and debts so you can start devising a repayment plan. 

If you're struggling with overwhelming debt, a debt solution may be the answer to your problems. One option to consider is debt consolidation, which involves combining multiple debts into a single loan with a lower interest rate. This can make it easier to manage your payments and reduce the overall amount you owe.

However, if you're unable to make your payments, you may find yourself dealing with a debt collector. This can be a stressful and intimidating experience, but it's important to remember that debt collectors are simply doing their job. If you're facing a home loan debt collector, consider speaking with a debt consolidation specialist to explore your options and find a solution that works for you.

Q2. What qualifies for debt relief?

If you’re in financial difficulty and assessing your options, it’s essential to act quickly. Reaching out for help from the Australian Financial Security Authority (FSCA) will allow you to reach a debt agreement that works for you. The FSCA offers numerous debt relief options, including bankruptcy, temporary debt protection (TDP), a Part IX debt agreement, or a personal insolvency agreement (PIA). 

There are no monetary qualifiers to apply for a debt relief solution with the FSCA. You simply must not be able to pay off debt, and you must have a residential or business connection in Australia. There is no minimum or maximum debt amount required to apply. 

Q3. Is there a government scheme to help with debt?

Yes, the FSCA offers four schemes designed to ease financial stress and reduce your debt, making it more manageable in the future. 

The four options are: 

• Declaring personal bankruptcy. This is a legal process that highlights you’re unable to pay debt. It will release you from all unsecured debt, such as credit card bills, but will not release you from secured debts, such as a home loan. To do this, you need to submit a bankruptcy form to the FSCA.

• Temporary debt protection (TDP). This provides a 21-day protection period where unsecured creditors can’t use debt settlement companies to chase owed funds. It’s designed to give you time to start the financial planning process and consider your options. During this time, it’s advisable to seek financial advice from financial counsellors.

• Debt Agreement. Part IX is a legally binding agreement made between you and your creditors and is a way to avoid declaring bankruptcy. You’ll negotiate with your creditor to pay only a percentage of the debt you owe over a period of time, and you’ll make regular monthly payments.

• Personal Insolvency Agreement (PIA). Personal insolvency agreements are another form of debt agreement where a trustee takes control of your assets and makes an offer to creditors on your behalf. This could involve paying part of your debts in regular instalments or in one lump sum.

Q4. What is the Australian Debt Relief Program?

The Australian debt relief program is designed to help you find an appropriate debt solution by starting a dispute resolution and providing you with a debt management plan. The FSCA will provide financial assistance and arrange a fair and manageable repayment plan for you, stopping the cycle of debt and providing you with more financial freedom.

Q5. Can Centrelink waive a debt?

If Centrelink pays you more than you’re entitled to, from pensions or allowances, the amount you were overpaid automatically becomes Centrelink debt. Luckily you can lodge an appeal with Centrelink asking them to waive the debts. If this is approved, you’ll never have to repay the amount and any amount you did repay will be refunded to you via money transfer.

Important: If your appeal is declined, you can devise a debt management plan with Centrelink, and make regular and manageable repayments until the full amount is repaid. 

Q6. How to get rid of 30k in credit card debt?

If you’re stuck with high-interest credit card balances and are struggling to pay the minimum amounts every month, you’re likely in significant financial hardship. However, there are options available to pay off debts without declaring bankruptcy or dealing with debt collectors.

Start with the most unmanageable debts first with the highest APR. Focus your energy on paying these off first by making higher payments every month and only paying the minimum on your other credit cards. Once this is paid, start with the following highest APR account, and so on. This is what’s known as the snowball method.

Alternatively, you could take out debt consolidation loans, allowing you to pay off all your high-interest debt and instead make one manageable repayment every month. 

If this isn’t working for you, we recommend calling the national debt helpline and talking to one of their financial advisers, who will guide you through what to do next. 

Summing up

Being in debt can be a stressful experience, but it’s important to know that there are many options out there to help you ease the money strain. If you liked this article, stay up to date with the WeMoney blog. Alternatively, read our article on ‘what is the financial planning process?’

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.

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