11 Commonly asked Debt Questions
We’ve compiled the 11 most asked debt questions at Debt Mediators in order to help you with some of those answers you’ve been eager to hear. From your inheritance money, to your superannuation queries – we’ve got all of these debt questions answered.
1. I found out my spouse has a lot of debt but didn’t tell me about it. Can the banks come after me?
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 person’s debt if they don’t). Your spouse’s creditors however, can seek to enforce judgment debts against joint property. Your share will generally be protected.
However, you should speak to your spouse about the debt they’ve been hiding from you. Later on down the line you could face some serious implications to your earnings, as well as causing unneeded stress between you and your partner.
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 fifteen years. However if you make a payment or acknowledge the debt in writing, this resets the period. Find out what Debt Collectors can and cannot do.
In certain cases, debts can be time-barred from being paid with legitimate reasoning. If you feel you are not meant to pay back a certain debt for whichever reason, you should seek legal advice at the next best opportunity.
3. If my parents die with a lot of debt, will I be responsible for it?
You won’t need to pay back any of your parents’ debt(s). Any debts your parents have will be deducted from the estate. This means when they pass away you’ll get significantly less in your inheritance fund to pay off said debt. 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?
The safest, most common ways are compiling your debts into one repayment, or negotiating with your creditor to improve your situation. Ultimately, you should pay off your secured debts first.
According to Australian law, once your debt has been repaid completely, you must then update your credit file with this information, so that your bank is updated. Unfortunately for the next five years a default payment will be on your credit file, which is wiped clean thereafter.
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?
Never use your superannuation to pay your debt. Your superannuation is protected under the Bankruptcy Act from your creditors. Eating into your pension fund is never recommended and also sparks a notice to your creditors that money is available.
7. My child has a lot of debt, how do I help them out?
Actually, the best thing you can do is let to 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 their children to end up in debt again. Until your child learns how to manage their money, keep yours in the bank.
8. Is a balance transfer a good idea?
It’s not recommended as you can actually double your debt over twelve months, and can land you in even more debt after that. Learn more about a balance transfer here.
9. If I don’t pay my mortgage when will I be evicted?
The bank doesn’t want to sell your house as 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?
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 some things that bankruptcy will stop you from doing including; running for parliament, holding any position that requires you to be a “fit and proper person” and 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?
Real estate agents don’t commonly check your credit history. We’ve never had any issue with a client being unable to rent a house due to a debt agreement or bankruptcy.
If you have any further debt questions, you can ask a debt expert 1300 171 351 to look into your claim.