keeping food on the table

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.

Consumer Action Law Centre

Not for profit, campaign focused consumer advocacy, litigation and policy organisation based in MelbourneFree legal advice and representation to vulnerable and disadvantaged consumers across VictoriaLegal assistance and professional training to community workers who advocate on behalf of consumerswww.consumeraction.org.au

Credit and Debt

How do you assess whether a person needs to pay a debt?

Disputing liability for the debt (later)

Options where the debt is owed

Must they pay?

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 #1A client with no income (other than Centrelink) or assets (other than

normal household items)

Option 1 Cease repayments

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…

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)

Adverse credit report

Risk of harassment

Option 1 Cease repayments cont . . .

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 . . .

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 collectorNote: 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 3Negotiation

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 . . .

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 1Enforcement orders cont . . .

or the creditor may seek a warrant to seize property not protected by Bankruptcy Act and Regulations.

Option 2 Bankruptcy

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 . . .

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

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 3Negotiation cont. . .

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

Risk managementClients 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

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 . . .

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 . . .

Unfair practices Accepting payment without

intention to supply Harassment and coercion

Credit Code defences/remedies

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 . . .

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

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?

Consumer Action Law Centre 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