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. 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.
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.
At a Glance:
✓ You ARE legally obligated to pay legitimate debts
✓ Debt collectors can pursue legal action after 30-60 days
✓ Your assets may be seized through court orders
✓ Credit rating impacts can last 5-7 years
✓ You have rights: demand verification, dispute errors, negotiate payment plans
✓ Ignoring collectors doesn’t make debt disappear—it escalates consequences
Are You Legally Obligated to Pay Debt Collectors?
Yes, if the debt is legitimate and you are the actual debtor, you have a legal obligation to pay. A debt collector is acting on behalf of a creditor to recover money you legally owe, which means ignoring it does not make it disappear and can lead to further action.
However, there are situations where you do not have to pay. You are not required to pay if the debt is not yours, if it has already been paid, or if the amount being claimed is incorrect. You may also have grounds not to pay if the debt is statute-barred, meaning the legal time limit for enforcing it has expired. If a debt is disputed, you are entitled to request evidence before any payment is made.
You also have clear rights when dealing with debt collectors. You can demand written verification of the debt, request supporting documentation, and ask for a breakdown of the amount claimed. Collectors must provide this information and cannot pressure you to pay without giving reasonable proof.
What happens if you do not pay depends on whether the debt is legitimate. If the debt is invalid or unverified, you can challenge it and require the collector to cease action until proper evidence is provided. On the other hand, if the debt is valid and remains unpaid, the matter may escalate. Below, we’ll explore what debt collectors can do if you don’t pay.
What Can Debt Collectors Do If You Don’t Pay in Australia?
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 include situations like:
- Providing information about the debt you owe
- Requesting payment
- Arranging payments
- Developing a repayment plan
- Reviewing an existing payment plan
- Explaining the consequences of failing to pay your debt
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.
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:
- If you owe a secured debt (such as a mortgage or car loan), the secured asset can be repossessed and sold.
- If you owe an unsecured debt (such as credit cards or personal loans), the debt collector can ask the Court to issue a warrant of seizure and sale. A warrant of seizure and sale authorises an officer of the court to enter and seize your property. Seized property is then sold at public auction, and any proceeds are applied to your debt.
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.
In simple terms, 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:
- Lead to higher interest rates
- Make it difficult to obtain new credit
- Make it difficult to rent a home
- Create challenges when changing jobs
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 support and legal advice for recovering your 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.
Contact us to find out more about what debt collectors can do to recover your debts!
FAQs
Can I ignore debt collectors in Australia?
You can ignore a debt collector, but it is rarely a good idea. If the debt is legitimate, ignoring contact can lead to escalation, including legal action, court judgments, or additional recovery costs. However, you are protected under Australian Consumer Law and ACCC debt collection guidelines, which prevent harassment or misleading conduct. It is usually better to confirm the debt and respond in writing.
What can debt collectors do if you don’t pay?
If you do not pay a legitimate debt, a debt collector can continue contacting you, report the default to credit agencies, add recovery costs, or recommend legal action. If court proceedings occur and a judgement is issued, further enforcement steps may follow. Debt collectors cannot threaten violence, mislead you, or contact you excessively.
What happens if I never respond to a debt collector?
Failure to respond can result in the debt being escalated to legal proceedings. If the court issues a judgement against you, it can impact your credit file and allow enforcement actions. Responding early gives you more options to resolve the matter.
Do I have to pay debt collectors immediately?
No. You have the right to request proof of the debt, dispute incorrect amounts, or negotiate a payment plan. A collector must provide written confirmation of the debt before demanding payment. Never pay until you are satisfied the debt is legitimate.
Can a debt collector take me to court in Australia?
Yes. If a debt remains unpaid and verified, a creditor may apply for a court judgement. If granted, the judgement can be enforced through various legal recovery methods. Court action is typically a last step after attempts to resolve the debt directly.
What rights do I have when dealing with debt collectors?
You have the right to be treated fairly, request debt verification, dispute incorrect debts, and limit contact to reasonable hours. Collectors must follow ACCC and ASIC debt collection guidelines and cannot intimidate, harass, or mislead you.