Chapter 8: Other types of debt

8.1 Dealing with debt 

Debt problems can arise when unexpected bills or expenses arise — like a ridiculously high telephone bill or a claim for damages after a car accident. It’s important to remember that not all debts are alike and that by understanding the type of debt you have, and your debt management options, you should be able to find a way out of any debt crisis. 

If you’re having difficulty paying your debts, think about taking the following steps: 

  1. prepare a detailed budget for yourself — see the sample budget in Chapter 17, part 17.1 
  2. figure out what you can afford to pay 
  3. prioritise urgent or essential debts 
  4. consider your payment options — remember these will differ depending on the type of debt 
  5. try to negotiate with your creditor(s) — be honest about your financial situation and realistic about what you can afford to pay 
  6. remember to keep channels of communication open — avoiding creditors won’t make them go away and may force them to commence court action 
  7. consider getting legal advice or assistance from a financial counsellor if you’re having difficulty managing on your own. 

Financial counsellors offer free, confidential services to help you sort out your money problems. They can help you prepare a budget, negotiate payment plans, seek extensions or waivers or help you access third party assistance (where available).

This chapter explores some familiar sources of debt and how to deal with them. 

8.2 Utilities 

Bill shock can happen when energy, water, telephone and internet bills are higher than expected. If you’re finding it difficult to pay your bills, you could try the following: 

  • contact your service provider to discuss hardship options 
  • apply for a rebate or voucher 
  • smooth out bill payment 
  • make a complaint (if you think the statement is wrong) 
  • reduce your usage, or change plans 
  • see a financial counsellor. 

Help from your service provider 

Energy and water providers usually have programs and plans that can help you stay connected. For example, all electricity and gas providers must offer a minimum of two payment plans every 12 months and provide longer-term help through a hardship program. Telephone and internet providers may have similar options. 

If your bill is overdue, or you receive a reminder notice, you should contact your provider immediately to discuss your options. You can ask for extra time to pay, a payment plan, or to be assessed for their hardship programs. Don’t ignore notices — help is available. 

Contact your supplier immediately if you think there has been a miscalculation. They will investigate internally. If you’re still unhappy with the outcome, you can make a complaint to the relevant ombudsman. 

Utility ombudsman schemes 

If you’re unhappy with decisions made by your utility service provider, you can make a complaint to the relevant ombudsman. These services are free and independent and aim to achieve a fair and reasonable outcome for all parties. 

Ombudsman schemes have the power to investigate and make recommendations about a wide variety of disputes, including: 

  • disputed accounts, including excessively high bills 
  • debts and arrears 
  • disconnection or restriction of supply 
  • actions of a provider that affect your property 
  • reliability of supply 
  • quality of supply (including claims for compensation) 
  • connection or transfer issues 
  • negotiated contracts 
  • marketing practices 
  • poor customer service. 

The Energy and Water Ombudsman NSW (EWON) provides a free and independent dispute resolution service for electricity, gas and water customers in NSW. 

The Telecommunication Industry Ombudsman (TIO) deals with complaints relating to telephone and internet service providers. 

Complaints can usually be made by phone, in writing or online. See their websites for further information. 

Rebates and vouchers 

In some cases, rebates and vouchers may be available to help you pay your utility bills. You should contact the following organisations directly for further assistance: 

  • Services Australia — Centrelink advance payment, utility allowance, telephone allowance and essential medical equipment payment (call 13 62 40) 
  • Telstra — bill assistance program and pensioner discount (call 13 22 00) 
  • Service NSW — low-income household rebate, family energy rebate, gas rebate, medical energy rebate and life support rebate (call 13 77 88) 
  • Sydney Water — Water Payment Assistance Scheme (call 13 20 92) 
  • Hunter Water — Water Payment Assistance Scheme (call 1300 657 657) 
  • Energy Accounts Payment Assistance (EAPA) — vouchers are available at Service NSW and through participating EAPA providers such as St Vincent de Paul, the Salvation Army and others. Vouchers can help pay your current electricity or gas bill, in cases of crisis or emergency. 

For further information about eligibility and how to apply for rebates, contact your provider, a financial counsellor or Service NSW. 

Bill smoothing 

Some utility companies offer ‘bill smoothing’ options, which allow you to pay small fixed amounts fortnightly or monthly towards your future bill (this means there shouldn’t be much to pay when your actual bill arrives). Contact your service provider to see if they offer bill smoothing. 


Another bill smoothing option involves using Centrepay. Centrepay is a voluntary bill-payment option available to Centrelink recipients. You can use Centrepay to arrange regular deductions from your Centrelink payment for ongoing expenses like rent, childcare, electricity and water, as well as household costs. You can use Centrepay with any business that accepts it. You can choose who you want to pay, how much you want to pay them, and which Centrelink payment the money will be deducted from. The money is then deducted from your account before you get your payment. Where you have other government-related debts, these will be deducted first (for example, advance payment repayments, debt repayments, child support payments, tax deductions, government housing rent deductions and so on). 

To find out more about Centrepay, contact Services Australia.

Consequences of unpaid utilities 

Unpaid utility bills can lead to disconnection of services and difficulty accessing services in the future. Where you haven’t paid your bill or the reminder notice, you will usually receive a disconnection warning notice. Don’t ignore these warnings. Contact your service provider and make use of their hardship options or make a complaint to EWON if the retailer is unable to help. When your service is disconnected, you should receive a further written notice outlining what you need to do to get re-connected. For electricity and gas, you will only receive a discount if the amount outstanding is above a minimum threshold (currently $300). Where bills remain unpaid after 60 days and proper notices have been served, service providers may also make reports to credit reporting bodies (CRBs), which will be reflected in your credit reports (see Chapter 6, part 6.12 for further information about CRBs). 

Reducing energy consumption 

A simple way to reduce your bills is to reduce usage costs, for example: 

  • switch off appliances when they’re not in use 
  • turn off lights, heating and cooling systems when they’re not needed 
  • choose energy-efficient lights and appliances 
  • insulate your home efficiently 
  • shop around for a better plan. 

8.3 Negligence claims 

Sometimes you can be held liable for injury or damage to other people or their property. The following must be established for you to be found liable for damage to others: 

  • you had a duty of care 
  • you breached your duty of care 
  • injury or loss occurred due to your breach 
  • the harm was foreseeable.

For example, occupiers of private property have a duty to take reasonable care to prevent foreseeable risks of injury to those who enter their property. If someone falls through your front step and breaks their hip, they can sue you for damages if you knew about the faulty step but did nothing to fix it or alert others to the risk. 

If you have public liability insurance for your home or business, this should cover damages for personal injury. If you don’t, the injured party may choose to sue you personally. If someone is demanding damages for personal injury or property damage, it’s essential to get legal advice as quickly as possible. Your insurance may cover the situation, or you may have a legal ‘defence’ to the claim. For example, you may not have had a duty of care, or you may not have breached that duty or the loss suffered may not have been foreseeable. 

8.4 Motor vehicle accidents 

If you have a car accident and you’re at fault, the other driver can make a claim against you for the damage done to their vehicle. If you have comprehensive insurance or third-party property insurance, your insurer should cover this amount, but if you are uninsured, you will be personally liable. If the other driver demands payment, and you refuse, they can commence a court action against you. Drivers who are not at fault in an accident can also claim for the cost of towing, hiring a replacement vehicle and other losses (such as loss of income, if they used their car for work). 

Understanding the laws relating to motor vehicle accidents may help you defend unjust claims, negotiate beneficial outcomes and avoid court. Legal Aid NSW and most community legal centres can give you free advice regarding motor vehicle accident claims. There are also helpful online resources available on the websites of the Financial Rights Legal Centre and LawAccess NSW.

Liability for ‘personal injury’ caused in car accidents is a separate issue. Car owners in NSW must have compulsory third-party personal injury insurance, which will cover you for personal injury claims. 

Tip — never skimp on third-party property insurance. The money you save won’t be worth it if you run into the back of a new Mercedes! 

If you’re in an accident 

If you’re in an accident, you should remember the following: 

  • all drivers must provide their name, contact details, licence and registration numbers to the other driver(s) 
  • it might be useful to get contact details for witnesses as well 
  • make notes and a diagram of the circumstances of the accident 
  • take photographs of the damage to vehicles/property and the scene of the accident 
  • note the time and conditions on the day the accident occurred (for example, whether it was dark, rainy or windy; and whether the lights were out) 
  • DON’T admit liability at the scene. 

Collecting evidence of the damage and circumstances of the accident will be useful for any insurance claims or if the matter needs to go to court. 

If you’re insured for property damage 

There are two types of motor vehicle related property insurance: 

  1. Comprehensive insurance — this covers you for damage to your car, and the car/property of third parties, regardless of whether you are at fault. 
  2. Third-party property insurance — this only covers you for damage to the car/property of third parties, where you are at fault. If you are not at fault, and the other driver is uninsured, you may be able to claim damage to your vehicle up to a set amount of between $3000 and $5000 (this is called Uninsured Motorist Extension (UME)). Contact your insurer for further information. 

If you are insured for property damage, you can claim on your insurance. You should always discuss the matter with your insurer before acknowledging responsibility or entering negotiations. If your insurer rejects your claim you can seek an internal review, and if you’re unhappy with that decision you can complain to the Australian Financial Complaints Authority (AFCA). 

If you aren’t insured for property damage 

A driver is ‘at fault’ if they fail to take reasonable care or don’t follow road rules. It’s not always easy to determine who is at fault, and sometimes more than one driver may be responsible. Being responsible for an accident does not necessarily mean you’ve committed an offence. There is a difference between a driving offence (criminal liability) and responsibility for damage (civil liability). The person driving the vehicle will be responsible for the harm caused. However, you can still be responsible if you are the owner of the vehicle and the driver was at fault, and acting as your agent, at the time the accident occurred. 

If you’re not at fault 

If you’re not at fault in a car accident, then you are entitled to seek compensation from the driver who was to blame. If the other driver is making a claim against you, and you think you weren’t at fault, then you should advise them as soon as possible (explaining your reasons). From there, you can negotiate who was at fault, the extent of damage and appropriate remedies. If the other party is at fault and insured, you can claim from their insurer. If the other party fails to make a claim, or the insurer refuses your claim, you can lodge a third-party uninsured complaint with AFCA.

If you’re at fault 

If you are responsible for the accident and you’re not insured, you will be personally liable for the damage caused. Even if the other party is insured and makes a claim on their insurance policy, the insurer may still try to make you pay for the damage — this type of claim is called ‘subrogation’. The next part of this chapter will explore your options if you’re uninsured and at fault in an accident. 

Demands for payment 

The first step taken against an ‘at fault’ driver is usually a demand for payment, which may be done orally or in writing. If you think you’re not at fault, let the other driver know and explain your reasons. 

Responding to a demand for payment 

Don’t ignore a letter of demand; if you do, the other driver/ insurer may take the matter to court unnecessarily, and you will have to pay for their legal costs on top of the cost of damages. If you agree that you’re at fault, but you disagree with the cost of repairs, you can obtain another quote, or ask the other driver to get additional quotes. If you believe you are partly at fault, then you might offer to pay a reasonable/ proportionate amount of their costs. 

Negotiating payment 

If you agree that you are at fault and that the quote for repair is reasonable, then you should pay the amount owing. If you can’t make the payment all at once, you could offer to pay by instalments. If you can pay some, but not all, you could offer to settle the matter entirely for a lesser one-off lump sum. Another option, to help with negotiation on these issues, is to arrange a mediation at a Community Justice Centre (CJC). CJCs offer free mediation services for people with common disputes like these. Mediation involves a neutral third party (the mediator) helping parties to identify issues in dispute, options for resolution and workable solutions. A mediator cannot make decisions for you.

Documenting your agreement 

If you settle or agree to a deal, you should make sure your agreement is written down and signed by both parties. Ideally, you should record your agreement as a ‘full and final’ settlement of the claim. In legal terms, we call this a ‘deed of agreement/settlement’ (see sample in Chapter 17, part 17.5). Entering a deed of settlement will ensure that the other driver can’t come back and ask you for more money, for the same matter, in the future. 

Going to court 

Court action may be taken if negotiations fail. Drivers have six years from the date of the accident to commence a court action for unpaid damages. Chapters 9 to 15 provide further details on how to respond to court action. 

8.5 Detention of goods 

Detention of goods occurs when: 

  • you have possession of someone else’s goods 
  • they demand the return of the goods 
  • you fail to return the goods 
  • your retention of the goods is not lawful. 

An example may be a failure to return a motorcycle locked in your garage and rightfully owned by a former flatmate. If they ask for the motorcycle back and you fail to provide it, they can make an application to the court to have the goods returned or compensation paid. They could also seek additional legal and enforcement costs, so you should always take demands for the return of goods seriously. If you believe you are legally entitled to the property, you should explain your ‘claim of right’ to the other party and try to negotiate the matter. Again, you may consider free mediation at a Community Justice Centre to try to help you resolve the dispute. 

Rightful owners of goods may chase you for compensation where you sold or disposed of goods but failed to follow procedures outlined in the Uncollected Goods Act 1995 (NSW).

If legal action has been started in the Local Court, and you believe the goods legally belong to you, you can defend the claim by filing a ‘Defence’ (see sample forms, Chapter 18). If you fail to defend the claim, a default judgment may be made against you, and the other party will be legally entitled to collect what they claim (or to be paid the amount claimed). You must lodge your defence within 28 days of receiving a statement of claim. If the NSW Civil and Administrative Tribunal (NCAT) hears the dispute, you should follow any directions made for the filing of evidence and submissions. 

See Chapters 9 to 15 for further information about responding to court action. 

8.6 Rental arrears and damage to rental property 

A landlord can issue a 14-day ‘notice of termination’ if rent is 14 days overdue. The termination notice should inform a tenant that they are required to vacate the premises unless they pay all rent owing or enter into (and fully comply with) a repayment plan. A landlord can also apply to NCAT for a termination order before the termination date specified in the non-payment termination notice. Another source of debt for tenants may involve property damage claims by landlords. 

If you’re in rental arrears or owe money for damage, you should contact your landlord to discuss your difficulty and negotiate a payment plan. Your landlord may be agreeable to this because it’s easier than finding a new tenant. 

NCAT has powers to deal with tenancy disputes where parties cannot agree. For example, NCAT may be able to help you set up a repayment plan for your rental arrears if you and your landlord can’t agree. Both tenants and landlords can apply, depending on the matter(s) in dispute. There is a small filing fee (with a reduced rate for students and pension recipients) and time limits that apply to applications. 

The NCAT process is designed to be user-friendly, and people can easily self-represent. NCAT will try to help parties negotiate a mutually agreeable outcome (via conciliation), before any formal hearing(s). 

You can find further information about your rights as a tenant from Fair Trading NSW, NCAT, Tenants’ Union of NSW or your local Tenants Advice and Advocacy Service (TAAS). 

8.7 Strata levies and fees 

If you own property in a strata complex, you will be liable to pay ongoing strata fees and levies. Sometimes there may be additional or unexpected costs which leave you in debt. If you fail to pay these accounts by the due date, interest will accrue, and enforcement action may be taken against you (with added enforcement costs). You should not ignore a strata levy notice. 

If you’re unable to pay a levy notice by the due date, you are entitled to ask the owner’s corporation to consider an application to pay by instalments. You can do this by contacting the strata manager and making a formal request to pay by instalment. The strata manager will seek the agreement of the owner’s corporation, which may or may not agree. If the owner’s corporation disagree, and you fail to pay, they may choose to commence an action against you in the Local Court. If the owner’s corporation does not agree to your request to pay by instalment, you are entitled to make an application to NCAT seeking a payment plan. If you have strata-related disputes, you should contact NSW Fair Trading first. They can provide information about your options and may try to mediate the matter. If they can’t help, you may consider whether you are eligible to commence an action in NCAT. The Strata Collective Sales Advocacy Service can provide free legal advice on strata related issues. 

See Chapters 9 to 15 if your strata scheme has already commenced a court action against you.

8.8 Domestic violence and debt 

Leaving a relationship can have profound financial implications, and lead to financial hardship and debt crisis. Victims of domestic violence are often at significant risk of debt crisis, due to issues such as financial abuse, inability to work due to trauma impacts, and the need to care for small children. 

Common sources of debt 

People leaving relationships can often find themselves in debt due to: 

  • liability for joint debts and mortgages 
  • unpaid electricity, gas, water, phone and internet bills 
  • rent arrears or damage to rental property 
  • hire-purchase and lease agreements with ongoing commitments 
  • guarantor commitments related to the debt of an ex-partner 
  • new housing and living expenses. 

If your debt troubles are due to separation or domestic violence issues, you should get free legal advice from a Community Legal Centre or Legal Aid NSW. 

Family law advice 

Following separation, it is vital to get independent legal advice about your rights under the Family Law Act 1975 (Cth). Even if you don’t want to involve lawyers, it’s essential to understand what the law says about the ‘just and equitable’ division of joint assets, liabilities and superannuation. There is a four-step process for determining post-separation property division: 

  1. What are the overall assets, liabilities, and superannuation balances? 
  2. What contributions did each party make? Both financial and non-financial contributions (such as parent and homemaker) are relevant. 
  3. What adjustments are needed? For example, should the primary caregiver to minor children get an extra share, to account for the fact that they won’t be able to return to full-time work? 
  4. What is just and equitable overall? 

Family law rules can also help determine how significant debts are split, post-separation. 

Contact Legal Aid NSW or your local community legal centre for free information, advice and referrals. In some cases, Legal Aid NSW or a Family Relationship Centre may be able to offer free or low-fee mediation services to help you separate your assets and debts post-separation. 

Getting help 

If you have unpaid energy, water, telephone or internet bills, you should contact your service provider and advise them of your situation. They may be able to arrange repayment plans and advise you of any rebates/assistance available. If you are unable to resolve the issue directly, contact the relevant ombudsman (EWON for energy and water bills and TIO for internet and phone bills). You may also be eligible for vouchers and rebates (See 8.2 Utilities above for further information). 

If you are subject to a joint credit card, personal loan or mortgage, you should contact your financial service provider as soon as possible, to advise them of your situation. In addition to helping with repayments, they may be able to freeze joint accounts and cancel additional credit cards (to ensure that your ex-partner does not spend money without your agreement). If you are unable to resolve things with your financial service provider, you can contact the Australian Financial Complaints Authority (AFCA). (See Chapter 6 for further information about dealing with credit-related debt). 

If you have other types of debt, try to find the part of this book that addresses them and get an understanding of your rights and options. Don’t be bullied into agreeing to things that are not fair to you. If you are a victim of domestic violence, you should contact your local domestic violence service(s), to see if they have any financial assistance programs available. For example, they may be able to give you a new ‘safe’ mobile phone, install a safety camera on your premises, help you with rent or provide bill assistance. 

Charities and community organisations can also assist in times of crisis. For example, the Salvation Army often provides material aid to struggling families; including cash, food vouchers, food parcels, clothing, furniture and household items, accommodation vouchers, assistance with housing costs, and help with bills. 

Following separation, there is a presumption that both parents will continue to provide financial support for minor children, dependent on income and percentage of care. If you are the primary carer of minor children, you can contact the Child Support Agency for assistance with the assessment and collection of child support. You should also contact Centrelink to advise them of your separation and to discuss your eligibility for government assistance. 

Financial counsellors can also offer practical help, post-separation. 

Domestic violence 

Leaving a violent relationship can be complicated by financial issues, but safety should be your primary consideration. If you have immediate fears for your safety or the safety of your children, you should contact the NSW Police. Police may be able to charge the offender or assist you with an Apprehended Domestic Violence Order (ADVO). You can also seek assistance from specialist domestic violence services, NSW Victims Services, counsellors and other support services.

Victims support 

NSW Victims Services offers support services for victims of violence in NSW — this includes free counselling, one-off recognition payments and financial assistance for violence-related expenses. To qualify, you must report the offence to the police (or a government/non-government agency), and you must have experienced some form of injury because of the violence (physical or psychological). You have two years from the most recent act of violence to seek financial assistance, and ten years to lodge recognition payment claims for domestic violence matters. Financial assistance may include assistance with immediate needs, out-of-pocket medical expenses, relocation expenses, and expenses for safety devices etc. 

For further information about financial support and payments contact Victims Services NSW.