Keeping Food on the Table
Protecting the income and assets of
low income CLC clients
Consumer Action Law Centre is a Victorian community legal centre. This
presentation is based on Victorian law. It is not a substitute for legal advice.
Consumer Action Law Centre
Not
for profit, campaign focused
consumer advocacy, litigation and policy
organisation based in Melbourne
Free legal advice and representation to
vulnerable and disadvantaged consumers
across Victoria
Legal assistance and professional training
to community workers who advocate on
behalf of consumers
www.consumeraction.org.au
Credit and Debt
How do you assess whether a person
needs to pay a debt?
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Disputing liability for the debt
(later)
Options where the debt is owed
Must they pay?
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Look at client through the ‘lens’ of
their financial position
Just because the creditor claims that
there is a debt (or a contract) does
not mean the debt is owed or that the
person must pay
Scenario #1
A client with no income (other than
Centrelink) or assets (other than normal
household items)
Option 1
Cease repayments
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Centrelink income is protected even if
Judgment is obtained
No assets other than ordinary
household items means that there is
nothing to seize
Option 1
Cease repayments cont…
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The debt remains and will increase. Does
this matter to your client? Is there a
likelihood of future income or assets? When?
Client will lose goods that are secured by the
debt (eg a car) or services (eg utilities)
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Adverse credit report
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Risk of harassment
Option 1
Cease repayments cont . . .
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New debt collection laws (Vic)
prohibit contacting a person after a
person advises in writing that no
further communication should be
made about that debt unless the
contact is by way of an action
issued through a court or VCAT or
by notice of intention to issue.
Option 1
Cease repayments cont . . .
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Stopping harassment: ‘Stop contact’
letter (see pro forma letter and
CALC FS12D)
Follow up in EDR or VCAT if contact
persists (see VCAT application)
Option 2
Bankruptcy
Advantages:
 Provides a clean slate
 No adverse changes to person’s current
financial position
 Severs relationship with debt collector
Note:
 Bankruptcy remains on credit report for 7
years (but bad debts are on there for 5)
 Some restrictions on employment
 Some debts are not wiped (child support,
court fines, infringements, debts incurred by
fraud)
Option 3
Negotiation
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Bulk debt negotiation for waiver
Seek waiver of individual debt (or
refer to financial counsellor)
Negotiate settlement and/or use
EDR for hardship variation if client
needs to pay (FOS, COSL, TIO,
EWOV)
Negotiation cont . . .
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A client with Centrelink income who
needs to pay is often in a good
position to negotiate with a creditor
Scenario #2
A person on low income, with some or no
assets
When does low income mean that you
have to pay?
Judgment Debt Recovery
instalment and attachment of
earnings orders
Warrant to seize property
OR
Bankruptcy?
Option 1
Enforcement orders
Once Judgment is obtained
 the creditor or the debtor may apply
to the court for an instalment order
– no minimum income threshold
 or the creditor may seek to enforce
the debt through an order for the
attachment of the debtor’s earnings
– again, no minimum income
threshold; maximum of 20% after
tax income
Option 1
Enforcement orders cont . . .
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or the creditor may seek a warrant
to seize property not protected by
Bankruptcy Act and Regulations.
Option 2
Bankruptcy
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Bankruptcy will protect a person
with a low income from having to
pay any of the debt back
A single (bankrupt) person with no
dependants can earn $47 693.00
(indexed) after tax with no
obligation to pay anything to his/her
creditors. Again no adverse changes
to client’s current financial position
Option 2
Bankruptcy cont . . .
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If your client is struggling to buy
food or other essentials, why should
they pay?
The law offers protection to our
vulnerable clients for good reason
Option 3
Negotiation
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Income under bankruptcy threshold
provides a negotiation tool for
clients who need to pay
Hardship variations
Compulsory EDR for financial
institutions (hardship, over
commitment etc) available even
after proceedings issued
Option 3
Negotiation cont. . .
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Consider ‘Stop contact’ letter.
Amend to indicate client’s income is
below bankruptcy threshold if
necessary.
But increased risk of court action.
Scenario #3
A person on low income & significant assets
Seek legal advice from Consumer
Action Law Centre
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Risk management
Clients should be made aware of
potential defences or remedies they
have against demands from creditors
Whether or not you think there is a
legal defence or remedy, seek legal
advice from CALC as there may be a
significant risk that your client will
unnecessarily lose their home or
another asset of value to them.
Consider the many legal defences
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Misleading and/or deceptive conduct
Unconscionable conduct (common
law and ACL)
Unfair contract terms (gym,
telecommunications)
Mental disability and intoxication
Limitation of actions
Minority
Legal defences cont . . .
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Consumer guarantees breaches
(unfit for purpose, unacceptable in
appearance, defective, unsafe, not
durable)
Unsolicited consumer agreements
(cooling off rights:10 days, 3
months, 6 months)
Legal Defences cont . . .
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Unfair practices
Accepting payment without
intention to supply
Harassment and coercion
Credit Code defences/remedies
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Linked credit (bank, educational
college)
Over commitment/ irresponsible
lending
Hardship (new threshold of
$500,000)
Leases in disguise
False business purpose declarations
Credit Code defences cont . . .
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No caveats (practice of some
brokers)
No blackmail securities
EDR with FOS or COSL, even when
proceedings issued against
consumer
Payday loans: responsible lending?
Prohibited mortgages (all property)
Key messages
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MoneyHelp: telephone financial
counselling service 1800 007 007
Strong law against harassment: use
it or lose it (VCAT or EDR)
EDR with FSPs (financial service
providers) available after FSP has
issued legal proceedings
CALC offers legal advice and
casework support
Any questions?
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Consumer Action Law Centre
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Level 7, 459 Little Collins Street
Melbourne VIC 3000
Advice line: 9602 3326 (worker only)
or 9629 6300
Rural access: 1300 881 020
Email: advice@consumeraction.org.au