How to manage debt and get debt help

Debt in Australia can be a significant problem if you are unsure how to manage it. Thankfully, the Australian financial sector offers many debt help solutions.

Let's get to the following commonly asked questions:

• What is the Australian debt relief program?
• What options are there if I am unable to pay my debt?
• What help is available for debt?
• Does the Australian government have a program for debt relief?
• Can the government write off debt?
• Is it possible to clear debt without paying?

Q1. What is the Australian debt relief program?

The Australian debt relief program is a way for Australians to pay off their debt in a way they can afford.

For example, debt agreements are a helpful part of the program because they offer affordable repayment plans for any debt you encounter. You can also work out the individual repayments with a repayment calculator. 

With a debt agreement, you only pay what you can afford, so you settle the part you can pay (a practical debt solution).

Q2. What options are there if I am unable to pay my debt?

If you can’t get your debt under control, there are some solutions.

With unmanageable debts (like credit card debt), you will have to go through legal action (dealing with debt collectors can be arduous). In addition, you may need to owe money, which they can take from your bank account (via direct debit) or place liens on your real estate. When dealing with debt collectors, the resulting payments can negatively affect your credit rating (credit score).

Q3. What help is available for debt?

One way to help yourself get out of financial difficulty is with a debt management plan. Steps to a debt management plan include:

• Work out your debt situation by calculating your total debt. If you have debt on a loan, you can use a loan calculator on a desktop or mobile phone.
• Contact a debt helpline if you don’t feel confident about managing debt; they can provide you with debt information and debt help so you can pay the lowest amount possible (do this before considering credit counselling or payday loans).
• Create a budget planner to calculate what you can pay. First, list your income and expenses (living expenses, home loan repayments, tax debts, personal loan accounts, health insurance, car loan options and more). Then, work out ways to save money to start credit repair (essential if you have bad credit).
• Work out what debt to pay first. Examples of debt to pay include your mortgage (mortgage stress can cause poor mental health), and bills like water, gas and car repayments.
• To gain financial freedom, pay off the smallest debt first and pay the minimum amount.

Note: Other ways you can get help to solve your debt-related financial hardship include hiring a debt agreement administrator, setting up debt consolidation loans, contacting financial advisers (or financial counsellors) or declaring bankruptcy.

Q4. Does the Australian government have a program for debt relief?

Debt relief in Australia is a serious matter. Therefore, Australia has several debt relief options.

For example, the ACCC can tell you what to do if you can’t pay off your debt (for example, legal advice on how you can proceed). However, they cannot give general financial advice or financial counselling.

They can give you the details on debt collection and explain that a debt collector has the right to want a repayment from you.

They can also find places where you can get further debt help and debt information.

You can also directly contact the National Debt Helpline (1800 007 007); they can offer debt advice to solve your poor financial situation. The National Debt Helpline is open Monday to Friday (between 9:30 am and 4:30 pm).

Q5. Can the government write off debt?

Court judgements can provide you with a composition order, which writes off some of your remaining debt. Do not engage in debt negotiation; the judge will deliver what they think is appropriate to consolidate your debt and fix your credit reports.

The judge will generally make this ruling if they deem it very unlikely that you can pay off your debt.

The government cannot write off certain debt types, including:

• Personal injury claims debt.
• Debts that emerge after someone commits fraud.
• Joint account debt.

Q6. Is it possible to clear debt without paying?

There are a few options available to clear your debt without paying. For example, you can go through the courts and acquire a composition order.

Also, you could acquire an Individual Voluntary Arrangement (IVA) from your creditors by negotiating with them,

Alternatively, you can arrange a personal insolvency agreement if your financial situation is dire and you need someone to provide debt help. Personal insolvency agreements involve assigning a trustee to take complete control of your financial assets and arrange a deal with your creditors.

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Summing up

There are multiple ways to formally pay or clear your debt and ways to come to an informal agreement with a creditor to pay a portion of the debt.

Some examples of ways to manage your debt include:

• Creating a debt management plan can give you a clear image of the debt you need to pay and how you can make an affordable payment structure.
• Contacting a debt helpline to get advice on paying debt (they can also advise on other financial matters like paying your bills).

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You can also clear part of your debt by acquiring a composition order from the court.

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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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