1.1 About this guide
Debt is a standard part of modern life, but unmanageable debt can lead to significant problems. Debt problems can arise with unexpected bills or expenses, like a ridiculously high phone bill or a claim for damages after a car accident.
If you’re unable to pay your debts as they fall due, a creditor may choose to take you to court. Depending on the type of debt, different rules apply regarding recovery and enforcement processes. In NSW, most formal debt recovery action against the average debtor takes place in the Local Court.
Most debtors would like legal representation when a creditor takes legal action against them. In reality, however, the average debtor has to self-represent, because they cannot afford legal representation and are ineligible for free assistance. We’ve developed this guide to help the average debtor in NSW, as well as their financial counsellors and advisors. It may also be a useful reference for lawyers who have some experience but are not experts.
Structure of this book
This guide cannot replace actual legal or financial advice, but it should help debtors to:
- understand common types of debt and debt recovery processes
- consider alternatives for managing debt issues, and
- respond to debt recovery action in the Local Court of NSW.
This book has 16 main chapters, followed by sample letters, templates and forms in Chapters 17 and 18 to help you prepare your documents. There is a list of contacts for organisations that provide assistance, and a list of legislation referred to throughout the guide. The glossary explains the meaning of commonly used terms. There are cross-references to further information and parts within the chapters are numbered — a reference to 6.12 means Chapter 6, part 12.
Is someone chasing you for a debt?
You must act quickly when someone is chasing you for a debt, because strict time limits apply when court action starts, and the court can make decisions in your absence if you don’t respond in time. You should take the following steps as soon as possible:
- Get legal and financial advice — you can contact LawAccess NSW, Legal Aid NSW or a community legal centre for free legal advice or a community-based financial counsellor for free financial counselling. You could also pay a private solicitor for advice.
- Investigate your options for legal representation — if you’re concerned about self-representing, you may be able to get free representation from Legal Aid NSW, a community legal centre or a pro bono scheme. You can also choose to pay for a private solicitor.
- Do your research — if you need to self-represent in court, then prepare well by reading this guide, talking to court staff and accessing other free legal resources.
In the next part of this chapter, we explore your options for getting help.
1.2 Free legal advice and assistance
Legal assistance services
LawAccess NSW, community legal centres (CLCs) and Legal Aid NSW provide free legal information and advice to all people, regardless of income. These services give general legal advice on many matters, including debt recovery processes. In some circumstances, they may be able to provide some minor practical assistance (for example, making a telephone call or writing a letter).
Each local court has an office that is called the court registry. The staff at local court registries can give you information about your court matter and appropriate court forms. They cannot provide legal advice.
Most full-time local court registries have a registrar or deputy registrar (chamber service) who can provide information, assistance and guidance to members of the public on local court procedures and applications. The chamber service does not provide legal advice and cannot represent people in court.
Some private solicitors offer a ‘first interview free’ arrangement in which you might be able to get some general advice in an initial brief discussion. You may also choose to pay for expert advice, especially if you think you have a good defence.
Financial counsellors, while not qualified to give legal advice, can provide invaluable free assistance in debt matters. For example, they can help you to re-arrange your finances, prioritise debts, assist you in making a realistic offer of settling the dispute or support you through the process of defending or negotiating a debt. We strongly encourage you to see a financial counsellor for assistance, especially if you do not have legal representation.
1.3 Legal representation in court
It is difficult to access free legal representation for most ordinary debt matters. However, some people may be eligible to get legal assistance through Legal Aid NSW, a community legal centre or a pro bono scheme. You should apply for legal aid first, as being ‘ineligible’ for legal aid may be a condition of service for community legal centres and pro bono schemes.
Legal Aid NSW
If you want a lawyer to represent you in your debt matter, you can apply to Legal Aid NSW for a grant of ‘legal aid’. A grant of legal aid means that you have a lawyer employed by Legal Aid NSW, or a private lawyer paid for by Legal Aid NSW, representing you in your legal matter. Even if you get a grant of legal aid, you may still need to pay the following:
- Initial contribution towards the cost of legal aid — this is a sum of money applicants must contribute, up-front, as a condition of getting a legal aid grant. Contribution levels are dependent on your financial circumstances.
- Final contribution towards the cost of legal aid — this is a contribution you must pay at finalisation.
To apply for a grant of legal aid, you need to complete a Legal Aid NSW application form which is available from Legal Aid NSW offices and online.
Legal Aid NSW’s grant policy guidelines apply to all grants for legal aid. These guidelines provide strict tests, which differ depending on the type of legal matter. To be awarded a grant, applicants need to satisfy all criteria relating to their case type. These tests may include:
- Jurisdiction test — is legal aid available for your particular legal problem?
- Means test — are your income and assets below the required threshold?
- Merit test — do you have a good case, and will a grant of legal aid have practical benefit if your case is successful?
- Availability of funds test — does Legal Aid NSW currently have enough funds to support your case?
Sometimes, ‘special disadvantage’ provisions may help some debtors get legal assistance, even if they fall outside the general grant guidelines. For example, where they are under 18 or have substantial difficulty dealing with the legal system because of a psychiatric condition, developmental disability, intellectual disability, or physical disability.
For further information about grants, or to get legal advice about your matter, you should contact your local Legal Aid NSW office.
Community legal centres (CLCs)
If you’re ineligible for a grant of legal aid, a community legal centre or a pro bono scheme may be able to assist you. Community legal centres are community-based and will have individual policies about the types of cases they take on. They usually target representation services at ‘disadvantaged’ clients, for example, non-English speakers, clients with disabilities, Aboriginal clients, low-income earners and single parents. They may also act in cases where there is a significant power imbalance between the parties. Contact your local community legal centre for further information.
Pro bono schemes
Pro bono means ‘in the public good’. Pro bono legal schemes are schemes which organise free or reduced fee legal services from private solicitors and barristers. Several schemes exist in NSW, and each has eligibility guidelines. The Law Society of NSW, the NSW Bar Association and many large law firms have pro bono schemes. Individual courts may also have pro bono legal services available.
Pro bono schemes will usually only help people who cannot afford a private lawyer, have a strong case and have experienced unfairness in incurring the debt. Broadly, pro bono providers will act where it is ‘in the public interest’.
Examples of cases where you might be eligible for free representation include:
- the seller refuses to accept a return of damaged/ faulty goods
- you don’t speak English, and the creditor didn’t explain contract terms
- you are under 18, and the creditor should not have contracted with you
- you signed a contract due to unfair or deceptive sales tactics
- the limitation period for your matter has expired, and there is no legal basis for a claim against you.
You can contact pro bono schemes directly or talk to LawAccess, Legal Aid NSW or a community legal centre to discuss your options.
Some people facing court action would prefer to put their affairs in the hands of a solicitor, no matter what it costs. If you’re willing and able to pay, then legal advice and assistance are always available.
You should consider the following issues when deciding whether to pay for legal representation:
- Whether the creditor/plaintiff has a solicitor — if so, you may be at some disadvantage without a solicitor.
- Whether the amount in dispute is significant enough to justify the cost of legal fees — if the amount is only small, you need to consider the risk of having to pay not only your costs but also those of the plaintiff/creditor if you lose.
- Whether the claim is in the Small Claims Division of the NSW Local Court — this division of the court is relatively informal, and you are unlikely to recover your legal fees, even if you are successful.
- Whether you are under 18 — in these cases an ‘appropriate person’ must be appointed to act in your place (known as a tutor), and your age may raise issues about whether you are liable. You should also explore your options for free legal representation if you’re under 18.
- Whether you have a disability — if your disability impairs your ability to self-represent, you should consider legal representation (also explore your options for free representation).
The Law Society of NSW runs a Solicitor Referral Service, which can refer you to local solicitors who deal with debt matters.
Solicitors are required by law to provide you with upfront information about their fees and to enter a legal costs agreement with you. Some will agree to a first consultation for free. If you think your solicitor has charged you too much, or didn’t give you an estimate of the cost or an hourly rate in writing, you can make a complaint to the Office of the Legal Services Commissioner.
1.4 Representing yourself in court
If you’re not eligible for free representation and can’t afford a solicitor, you may need to represent yourself in court. If this is the case, it’s in your interests to be well prepared. You should do your research and ask for help if you need it.
You need to understand both the laws that apply to your debt matter and the relevant debt recovery processes that apply. Reading this guide will be a good start, but it might not be enough.
Legislation and case law
In NSW, we are subject to both federal and state-specific laws. For example, if you buy a faulty car, you may have protections under the Australian Consumer Law (federal laws), and the state-based motor dealer laws.
The ‘law’ that relates to your matter may include both acts of parliament (legislation) and case law (judge-made law), which interprets legislation and articulates legal principles that apply in certain situations. We have included references to some key legislation throughout this guide, but it’s just a start. You can access NSW legislation on the government ‘NSW Legislation’ website. In some circumstances, you might have to examine past decisions to see how tribunals and courts have interpreted the laws and rules in similar matters. For published judgments and decisions in NSW, see the NSW Caselaw website. The Australian Legal Information Institute (AustLII) website, contains up-to-date versions of all legislation, rules and regulations in Australia, and published decisions from various courts and tribunals.
Community legal resources
You can get free legal advice from Legal Aid NSW or a community legal centre, and you can also access a broad range of user-friendly legal resources online. For example, LawAccess is a government-funded service, that provides a wealth of easy-to-understand legal information online (in a variety of languages). Find Legal Answers, run by the State Library of NSW, provides plain English resources online and in NSW public libraries to help answer common legal questions. The State Library also has an extensive law collection, including legal textbooks, law journals, legislation and law reports.
Information about specific courts
Another good source of information will be the website of the court or tribunal dealing with your matter. Most New South Wales courts, including the Local Court, use a uniform set of forms for civil matters. You can find these forms on the Uniform Civil Procedure Rules (UCPR) website. You may also need to know about the practices and procedures specific to the court or tribunal hearing your case, such as the practice notes issued by the court. For civil debt matters in the Local Court, the critical practice note is Local Court Practice Note Civ 1 (Case Management of Civil Proceedings in the Local Court), which is accessible on the Local Court website.
Further practical assistance
As noted above, court registry staff can offer practical assistance when it comes to identifying and completing the correct forms.
The LawAccess website also provides excellent practical assistance by providing step-by-step guidance on how to respond to debt matters and examples of completed court forms.
Other help in court
You may want a person who is not a solicitor, such as a friend, relative or financial counsellor, to help you in court. It is up to the decision-maker in the case to decide if this will be allowed, but it never hurts to ask.
1.5 Interpreters and translation services
If you need an interpreter when you contact a court or tribunal, you can use the free telephone Translating and Interpreting Service (TIS). Call 131 450 and tell them the telephone number of the court you need to contact. An interpreter will call the number while you are on the phone and translate what the person on the line says to you.
If Legal Aid NSW or a community legal centre are helping you, they can arrange interpreting services, free of charge.
For most court proceedings relating to debt matters, you must arrange and pay for an interpreter. You can arrange an interpreter through the Language Services Unit of Multicultural NSW, or any accredited independent interpreting service. You can search for interpreters by language and location on the website of the National Accreditation Authority for Translators and Interpreters (NAATI). Interpreters for court and tribunal proceedings must have at least a level 3 accreditation from NAATI. If your matter is in the NSW Civil and Administrative Tribunal (NCAT), they can arrange an interpreter for you (remember to provide sufficient notice).
If you need documents translated for a court or tribunal matter, you can arrange a translator through the Language Services Unit of Multicultural NSW or an accredited independent translator. You can access these services through Service NSW centres.
The Commonwealth Department of Social Services also provides a free translation service for non-English speaking people settling permanently in Australia. This service can be used only by eligible individuals within the first two years of their eligible visa date.
Alternatively, if you can’t afford a professional interpreter, you might want to bring along a friend/relative to assist you in court.
People with hearing impairments
Court users who are deaf will need to organise an interpreter for themselves. The Deaf Society and Multicultural NSW can provide Auslan and relay interpreters for a fee.
Court users with hearing impairments can request a hearing assistance device to help them hear in the courtroom setting. Contact the court registry for further information (about two weeks’ notice is advisable).
1.6 Other types of help
Financial counsellors and advisors
Sometimes you may just need help to plan your finances better, negotiate with debtors or deal with a debt crisis. Financial counsellors can help people struggling with these issues. A free and independent financial counselling service may be able to help you consider all your options and work your way out of debt. See the websites of Financial Counselling Australia and the Financial Counselling Association of NSW (FCAN) for a service near you.
You could also discuss your options with your accountant or financial advisor.
If your debt troubles are related to gambling, then it might be sensible to deal with the underlying problem. See the GambleAware website for further information.
Being in debt can be stressful for you and your family. If you’re feeling anxious or depressed about your debt issues, you might want to talk to your GP about a referral for counselling. Lifeline also offers a 24-hour telephone service for anyone who needs crisis support (call 13 11 14).