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The do’s and don'ts of debt

Frank Lilley
23rd April, 2018

Australian household and personal debt levels are some of the highest in the world and not surprisingly many of us face financial stress and difficulty managing debts at one time or other in our lives.

1. If you or someone you care about is ever in a situation where you are having trouble paying debts this short overview is designed to help you take control of your finances and get back on track. For a start:

Don’t ignore the problem.  There are positive actions you can take.  And there is plenty of help available.

Do a budget and write down all your debts.  This will give you a clear picture of your income and expenses (including payments on debts) and show you where you can make savings.  You will be able to see quickly whether you can realistically pay your debts without help.

MoneySmart resources:

Don’t panic and rush into a debt agreement or bankruptcy.  Taking these actions may have a serious impact on your career in the ADF and future financial outcomes.

Do seek advice from your local ADF legal officer before doing anything.  They may refer you to an external legal, advocacy or financial counselling service for help.

2. If after completing your budget you think that you will not be able to manage your debts.

Don’t just default on your payments.  It is important to be proactive, get help and start to deal with the situation as soon as possible.

Do talk to your credit providers as soon as possible, preferably with the help of a financial counsellor, and inform them that you are facing ‘financial hardship’ and are having difficulty keeping up with your payments.  Your credit providers may try to help you by offering you lower repayments depending on your situation.  This is called a hardship variation.  Make sure that you can afford to make the repayments before you agree.

MoneySmart resources:

Don’t pay for help.  There are many for-profit ventures, sometimes called ‘debt solution companies’ offering to help people with financial difficulties.  They may provide ‘debt consolidation loans’, ‘debt agreements’ or other services for which they will earn fees or commissions.  Avoid them.  Use a free financial counselling or legal service instead.

Do seek help urgently from a financial counsellor or free legal service.  Financial counsellors provide a free service to eligible people.  They are experts at advocating for people with financial problems and dealing with creditors.

To find a financial counsellor either:

  • call the National Debt Hotline 1800 007 007; or
  • search the Financial Counselling Australia website

There are a number of free services for people who have legal problems, including with debts, but are not able to pay for a lawyer.

To find a free legal service you may search the National Association of Community Legal Centres website or contact one of the following services in your state or territory:

  • Legal Aid;
  • a not for profit consumer credit legal service; or
  • women’s legal service.

Even if you intend on entering into a debt consolidation loan, debt agreement or bankruptcy you should always seek legal advice first.

And finally, if you are in doubt about anything in this article, have difficulties managing debts or any other questions or concerns about personal finances do not hesitate to contact us for assistance.

Frank Lilley
Operations Manager
ADF Financial Services Consumer Centre

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