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Debt Problems

For many Australians, debt is a heavy and debilitating burden. Escaping its grasp can feel overwhelmingly difficult, often necessitating some form of serious intervention. Crucially, though, help is out there, waiting to be found. The key to debt problems is to act immediately – taking action sooner rather than later is the best defense against a further downward spiral. Your journey to financial freedom begins with your first step.

Navigating Debt: A Guide to Getting Back on Track

Debt can feel overwhelming, but for Australians struggling with financial pressure, there is a wealth of free and confidential support available. The key to tackling debt is to take action early and access professional help—without paying for it.

Get a Clear Picture of Your Situation

The first and most crucial step is to confront your finances and determine exactly what you owe. The Australian Securities and Investments Commission (ASIC) advises that you need a clear breakdown to regain control.

  • List Everything: Create a comprehensive list of all your debts, including credit cards, personal loans, Buy Now Pay Later services, utility arrears, and outstanding fines. Note the total amount owing, the minimum repayment, the interest rate, and the due date for each.
  • Create a Budget: Use a budget planner to compare your income (money coming in) against your expenses (money going out). This will show you exactly how much money you have left over—your ‘debt money’—to put towards repayments. The government’s MoneySmart website provides a free budget planner tool.
  • Check Your Credit Report: You are entitled to a free copy of your credit report every 12 months (or more frequently in certain circumstances). Knowing your credit standing can help you identify any errors and understand your financial history.

Prioritise Your Debts

Not all debts carry the same immediate risk. You must prioritise payments to secure essentials like your home and utilities.

  • High-Priority Debts: These are debts where failure to pay could result in the loss of essential services or assets. Always prioritise:
    • Rent or mortgage payments.
    • Essential utility bills (electricity, gas, water).
    • Car repayments (if needed for work).
    • Fines or tax debts that could lead to legal action.
  • Lower-Priority Debts: These typically include credit card balances and unsecured personal loans. While they must be paid, high-priority debts come first.
  • Contact Providers Immediately: If you cannot pay a high-priority bill, call the provider (e.g., your bank or energy company) straight away. Most businesses have a financial hardship team that can offer assistance, such as delaying a payment or setting up a long-term payment plan.

Contact the National Debt Helpline (NDH) for Assistance

For free, professional help, the National Debt Helpline is the primary resource coordinated by Financial Counselling Australia and supported by the Australian government.

A Financial Counsellor is a qualified professional who offers free, confidential, and independent advice. They do not lend money, charge fees, or sell products. They can:

  • Assess your entire financial situation.
  • Explain your rights and responsibilities.
  • Help you negotiate new payment arrangements with creditors.
  • Provide information on debt agreements or bankruptcy.

You can speak to a financial counsellor by calling the National Debt Helpline on 1800 007 007 or visiting the National Debt Helpline website.

Specialist Support Services

  • Mob Strong Debt Helpline: Offers free financial counselling and legal advice for Aboriginal and Torres Strait Islander peoples: 1800 808 488.
  • Small Business Debt Helpline: Provides free advice for small business owners and sole traders experiencing financial difficulty: 1800 413 828.
  • Financial Counselling for Gambling: Specialist support is available through the NDH if gambling is a factor in your debt.

Understanding Formal Debt Solutions

If your debts are unmanageable, there are formal pathways to resolve them, but these should only be pursued after seeking advice from a free financial counsellor. The Australian Financial Security Authority (AFSA) is the government body responsible for regulating personal insolvency.

  • Negotiation (Hardship Variation): Your first option is always to negotiate with your creditors yourself or with the help of a financial counsellor. This is often called a hardship variation and can include pausing repayments or extending the loan term.
  • Debt Agreements (Part IX): A legally binding agreement between you and your creditors, administered by a registered debt agreement administrator. It allows you to pay back a percentage of your debt over a period of time, after which the remaining unsecured debts are cleared. This is a form of personal insolvency and will affect your credit rating.
  • Bankruptcy: This is a formal, legally complex process that may clear most of your debts but has significant and lasting consequences on your employment, travel, and ability to obtain credit. Information on your formal options can be found on the Australian Financial Security Authority website.

A word of caution: Be wary of commercial “debt management” or “credit repair” companies that charge high fees for services that you can receive for free from a financial counsellor or do yourself.

Reference List

Information for this article was taken from the following websites: