11 Commonly asked Debt Questions
1. I found out my spouse has a lot of debt but didn’t tell me about it. Can the banks come after me?
No. Under Australian laws you are not liable for your spouse’s debts unless it’s a joint account or you signed a guarantee (an agreement to pay the other persons debt if they don’t). Your spouse’s creditors however, can seek to enforce judgment debts against joint property. But your share is generally protected.
2. A debt collector contacted me about an old debt. Do I have to pay it?
It’s entirely possible that the debt is statute barred and not enforceable. In most jurisdictions the limitation period is six years. However if you make a payment or acknowledge the debt in writing, this resets the period.
3. If my parents die with a lot of debt, will I be responsible for it?
No. Any debts your parents have will be deducted from the estate. If your parents have no assets, their debt will die with them.
4. I’ve got a default, how do I fix my credit history?
Time is the only thing that will fix it, unless it was genuinely listed in error. It will take five years for the default to fall off.
5. Should I get a small debt to improve my credit history?
No, this is a myth. The best credit history has nothing on it.
6. Should I use superannuation to pay my debt?
No. DO NOT USE YOUR SUPER. You superannuation is protected under the Bankruptcy Act from your creditors. We see many people where they’ve accessed their super and ended up bankrupt anyway. Had they not got that money out from super they would have had a much easier time in retirement.
7. My child has a lot of debt, how do I help them out?
The best thing you can do is let them deal with it themselves. We often speak to parents who’ve spent tens of thousands helping their children pay off their debt only for the children to end up in debt again. Debt is a sign that your children are not good at managing money. Until your child learns how to manage their money, keep yours in the bank.
8. Is a balance transfer a good idea?
This is what generally happens with a balance transfer: you end up with one credit card on 0% interest and another with the whole balance available. You can only afford the minimum payment on the balance transfer but then another unexpected expense pops up and you use your old credit card, just this once. Twelve months later, the 0% interest period is over and you’ve got double the debt. So that’s a no.
9. If I don’t pay my mortgage when will I be evicted?
The bank doesn’t want to sell your house. It incurs a lot of cost and risk. They will encourage you to sell it yourself first. If you haven’t sold it within six months they may evict you. We’ve had clients in their houses for twelve months without making any payments. This time needs to be used to accumulate a rental deposit.
10. Will bankruptcy ruin my life forever?
No. Bankruptcy only lasts for three years and in most circumstances is on your credit history for another two. Bankruptcy will be recorded on the NPII forever however this is not generally used for credit reporting purposes. There are somethings that bankruptcy will stop you from doing forever including; running for parliament, holding any position that requires you to be a “fit and proper person”, becoming a bankruptcy trustee. Most Australians will never be affected by these restrictions.
11. Will a debt agreement or bankruptcy stop me from renting a house?