Australia’s debt collection industry is closely regulated to ensure ethical and legal practices.

The rules surrounding the industry place limitations on what debt collectors can and can’t do. While collectors are limited in how, when and where they can contact you, there are several legal avenues they can use to recover a debt.

We’re often asked about what happens if you don’t pay debt collectors. The answer depends on your situation. For instance, if you are genuinely unable to pay a debt, we’ll take different steps when compared to dealing with a debtor who’s simply unwilling to cooperate.

In this article, we’ll learn what debt collectors can do if you can’t pay in Australia, and how that affects your life moving forwards.

What Can Debt Collectors Do If You Don’t Pay?

1. Contact You via Phone, Email or In-Person

Debt collectors are allowed to contact you via phone, email or in-person. The ACCC says that a debt collector can only contact you for “reasonable purpose” and only when it’s necessary. Reasonable purposes includes situations like:

Debt collectors are also limited in when they can contact you. Phone or in-person contact can only occur between 7.30am and 9pm on weekdays, or 9am to 9pm on weekends. Collection agencies can only visit your private home as a last resort.

2. Commence Legal Proceedings

Debt collectors will attempt to contact you and arrange a payment plan. If they’re unable to obtain payment this way, they can commence legal proceedings to recover the debt through debt collections laws.

This is done by filing a Statement of Claim with the relevant Court. Once the Statement of Claim is served on you, you have 28 days to pay the debt or file a defence.

The Court can enter a judgement against you if you do not respond in time. This judgement comes in the form of a Court Order requiring you to pay your debt.

3. Seize and Sell Your Assets

Debt collectors may be able to seize your assets and sell them in order to recover the money that’s owed. There are two common scenarios where this occurs:

4. Garnish Your Wages

If you fail to comply with a Court Order to pay your debt, the debt collector can apply to the Court to garnish your wages.

A garnishee notice allows the debt collector to obtain payment directly from your bank, employer or another source of income (such as a tenant). The money you are owed from these sources is automatically redirected towards your debt.

5. Affect Your Credit Rating

Missing payments or failing to pay your debts will lower your credit score. Low credit scores can:

Debt collectors can also impact your credit score. If a debt collector obtains a Court Order against you, credit reporting agencies view that as a failure to pay your debt, which can significantly lower your credit score.

6. Make You Bankrupt

A debt collector can apply to make you bankrupt if you owe $10,000 or more. The debt collector may commence these proceedings on behalf of the creditor they are working for.

During bankruptcy, an official Trustee takes control of your assets and finances. The Trustee will sell your assets (with some exceptions) and use the proceeds to repay outstanding debts. 

Bankruptcy has major long-term consequences. Not only will your assets be sold, bankruptcy affects your ability to obtain new credit (such as credit cards) and prevents you from acting as the director of a company. 

Bankruptcy is a last resort when collecting debts. It is a relatively uncommon scenario, but it can have a major impact on your life. It’s always better to reach an alternative payment arrangement if possible.

Manage Debtors Effectively With Dynamic Commercial Collections!

Outstanding debts can leave your business in a bad position. Worse, recovering those debts on your own can be a time consuming process.

Dynamic Commercial Collections is a licensed debt collection agency that makes the process simple. Our qualified team uses legal and ethical collections tactics to recover debts of every size.

We have a 95% successful collection rate. That’s thanks to our expertise and intimate understanding of the industry. We work with your debtors to develop feasible repayment plans that improve outcomes for everybody.

In extreme cases, we can also provide legal support for debt collection when recovering debt through the Court system. While we generally consider this a last resort, it may be your best option when dealing with particularly stubborn debtors.