Australians reminded of best practice approach to debt disputes as economic challenges continue

The Australian Financial Security Authority (AFSA), Financial Counselling Australia and the Australian Restructuring Insolvency and Turnaround Association (ARITA), remind individuals who are in financial distress and their creditors to consider how disputes such as strata debts could be managed in the face of challenging economic circumstances.

Both individuals who are in financial distress and creditors should be aware of the importance of addressing unmanageable debts early and understand the options available to resolve debt disputes before formal insolvency is considered.

‘Creditors are strongly encouraged to be flexible when supporting clients experiencing financial difficulty – manageable payment plans, hardship arrangements and similar alternatives are the best starting point,’ AFSA Chief Executive Tim Beresford said.

‘If all other avenues have been exhausted, the insolvency system provides a last resort.’

Tim Beresford also highlighted the broader importance of the insolvency system for the economy – in particular for creditors who have exhausted other avenues for payment.

‘Having an accessible and robust insolvency system is an important part of Australia’s economy,’ Mr Beresford said.

‘Our personal insolvency system supports confidence in lending, making credit accessible to consumers while also providing protection for those that have unmanageable debts.’

‘Under Australia’s insolvency system, anyone owed a debt worth more than $10,000 may pursue formal bankruptcy action against an individual. We recommend exhausting all other options first.’

‘AFSA’s experience is that most creditors provide a flexible approach and explore reasonable alternatives before starting formal action.’

‘For individuals in financial distress that means that the first and best option is to actively engage with all creditors that you owe money to and try to come to a mutually agreed resolution with them. People in financial distress are often surprised at how positively most creditors will act to work out a way through their situation.’

‘We monitor how the personal insolvency system is used and engage directly with industry stakeholders when required.’

Get help early

Financial Counselling Australia CEO Fiona Guthrie explained the importance of people experiencing financial stress seeking help early from a trustworthy source.

‘We encourage anyone experiencing financial hardship to reach out to a trustworthy source like a financial counsellor to talk through your situation,’ Ms Guthrie said.

‘We can work with you and your creditors to understand your financial position and help understand what options you have to get back on track.’

‘Many debt problems can be resolved when appropriate action is taken early.’

The role of trustees

Once someone has entered a formal personal insolvency arrangement like bankruptcy, registered trustees play a critical role, as highlighted by ARITA’s CEO, John Winter.

‘Bankruptcy can be a stressful time for people in a vulnerable situation, but it can also provide a sense of resolution from the difficulties people have faced in the lead up to being made bankrupt,’ Mr Winter said.

‘While bankruptcy trustees must act strictly in accordance with bankruptcy law, with their primary role being to achieve a fair outcome for creditors, someone who becomes bankrupt can feel assured that they will be treated fairly and with respect during their bankruptcy. If you become bankrupt, working cooperatively with your bankruptcy trustee will substantially reduce the stress of the process.’

Find out more

Financial counsellors offer free, independent, and confidential advice to help people experiencing financial stress get back on track. You can contact a financial counsellor by ringing the National Debt Helpline on 1800 007 007, or access self-help resources and a list of face to face services at ndh.org.au.

Large creditors like the ATO and major banks have information and support available to assist people in serious financial difficulty. Find out more by visiting ato.gov.au or ausbanking.org.au.

You can also get advice from trusted sources such as insolvency professionals registered with the Australian Financial Security Authority – find out more on the AFSA website, afsa.gov.au.

Media contact

AFSA: Email media [at] afsa.gov.au or phone 0408 105 665.

ARITA: Email John Winter jwinter [at] arita.com.au or phone 0414 533 133

FCA: Email Mike Bruce mike.bruce [at] financialcounsellingaustralia.org.au or phone 0403 920 189.