What Happens if you Don’t Pay your Debts?
Your credit card bill is due but you don’t have the money. You’re sure that something bad will happen, but what exactly will happen if you don’t pay your debts, and when?
For the first 60 days, nothing much will happen. You might get a helpful reminder to make a payment.
Somewhere between 60 and 90 days, the bank may issue an S80 Default notice. Under Section 80 of the Consumer Credit Code, creditors are required to formally notify you that you are in breach of your credit conditions. That is, you are in default. You are then given 30 days to make it up.
After the conclusion of the S80 30 day period, things start to get serious. A formal default can, at this stage, be lodged on your credit history. This will be there for five years. During that time, it will make it hard to obtain finance. The bank will issue a Letter of Demand. While this is not from the courts, it is a formal request that you make a payment amount by a specified date.
If you don’t make the payment requested on the Letter of Demand, court action can commence at this stage and you can be issued a Statement of Claim. If the court finds you do owe the money, the bank will be awarded a Judgement against you.
The debt collector can enforce their debts through three main ways:
- They can Garnish your wages;
- Obtain a Writ (legal document from the court) to have a Sheriff seize your property or;
- If the debt is more than $5,000, they can legally make you bankrupt.
If you have no assets and your only income is government benefits, you are referred to in the industry as “judgment-proof”. This means a creditor can obtain judgement against you but they can’t actually enforce it.