Debt recovery and enforcement

Tips for consumers dealing with debt

  • Check to see whether the debt is legally enforceable.
  • See a budget adviser.
  • Try to re-negotiate payments with the lender so that these can be managed.
  • Check to see whether any help is available from Work and Income.
  • Get legal advice about bankruptcy, the no asset procedure and summary instalment orders (see “When you can’t pay your debts: Bankruptcy and other options” in this chapter).

What is a debt?

A debt is when you owe money. An overdue debt could include not only a situation where you haven’t made your payments for a personal loan from a bank or loan company, or a hire-purchase debt, but also one where, for example, you haven’t paid one of the suppliers for your business or trade.

In this situation, the law generally refers to you as the “debtor”, and the person or company to whom you owe the money as the “creditor”.

What can happen if I don’t pay a debt?

The creditor may employ a debt collection agency to recover the debt. Or they may pass on or sell the debt to a debt collection agency, who then legally becomes the “creditor” for the debt. Alternatively, the creditor can take you to court to recover the debt and then use the different enforcement methods available through the courts (see below, “How debts are recovered through the courts”).

The creditor may also:

  • report the debt (see “Credit reports” below)
  • take and sell any property that you’ve put up as security for the debt, if the credit contract allows this (see “Repossession” below)
  • recover the amount of the debt from any guarantor or take and sell any property that a guarantor has put up as security (see “Guarantors” in this chapter).

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