Disclaimer: The material in this print-out relates to the law as it applies in the state of Victoria. It is intended as a general guide only. Readers should not act on the basis of any material in this print-out without getting legal advice about their own particular situations. Victoria Legal Aid disclaims any liability howsoever caused to any person in respect of any action taken in reliance on the contents of the publication.

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Reasons you might not have to pay your debt

Find out why you may not have to repay a debt. This could be because you have a defence, you receive payments from Centrelink or Workcover, or the debt is old.

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You may not have to pay a debt for a number of reasons:

  • you may have lodged a defence in court because you disagree with the debt
  • your only income source is Centrelink or WorkCover (known as WorkSafe in Victoria)
  • your debt is older than a set period of time
  • you are, or may become, bankrupt.

Reasons you may not have to pay your debt

You disagree with the contract

You may disagree that you owe any money and have a legal defence.

A defence to a debt would include: that you agreed to a contract, but:

  • you were told something that was not true (you were misled into signing)
  • you were forced to sign, or were taken advantage of (even by a family member)
  • a law has been broken.

If this applies to you, it’s best to get legal support quickly. This is because you only have a short time to act and will need legal advice in order to file a defence in court. Read more about Filing a defence in court.

Visit Other support for debt and bankruptcy to get legal support and other help. You can also Speak to us via our online Legal Help Chat.

If your only income is from a Centrelink or WorkCover, a court will not make you repay your debt from this income.

However, for this to apply your defence must also be judgment proof. This means the court can not make you pay back a debt.

To be judgment proof you will need your income to be only from Centrelink or WorkCover (WorkSafe in Victoria), and also prove you:

  • do not own and are not buying a house
  • do not own any significant assets, for example, savings or expensive antiques. Basic household goods, such as your fridge or washing machine, are not significant assets
  • own one registered car worth less than $9,600.

Note: If you decide to apply for an instalment order when you attend court, then you will lose this protection.

Your debt is too old

You may not have to pay an old debt if, for a period six years, you have not:

  • made payments on the debt
  • said in writing that you owe the debt
  • had any court orders made against you.

This is called a statute barred debt.

If you are not sure if your debt is statute barred, we suggest you get legal support before you speak to your creditor or make repayments.

Further information about statute barred debts

In some cases the debt is exempt after 15 years, not six years.

This applies, where:

  • the debt is secured by a mortgage over property
  • there is already a court order to pay the debt.

Where there are mortgages over property, or if a court has ordered that you pay the debt, the law is complicated. We recommend you get legal help by visiting Other support for Debt and Bankruptcy.

If the creditor asks you to pay an old debt

If a creditor asks you to pay an old debt, we recommend you get legal help.

They must prove that the debt is yours and less than six years old (or 15 years old in some cases). If they cannot, and you have not agreed you owe the debt, or started to pay some of it, they cannot force you to pay.

Check if your debt is statute barred. If so, then this is a defence if the creditor decides to go to court.

You are or may become bankrupt

It is common for people to get into debt because they are trying to pay off too many things at once.

Sometimes an offer of part-payment can work. Or, as the debts pile up, you might choose to become bankrupt.

Bankruptcy gives you a legal right to protection from your creditors. You hand over control for most of your debts and significant assets to a bankruptcy trustee. Not all debts will be cancelled by bankruptcy.

Get other legal support for debt and financial issues.

Your options before a court order or judgment

Once you know your rights, write to the creditor to explain why you think you don't have to pay.

For example:

  • you legally do not have to pay the debt (for example, if the debt is an old debt it may be statute barred)
  • they will not be able to get money from you (for example, if you are receiving payments from Centrelink or WorkCover you may be judgment proof).

You need to be certain that your debt is statute barred or that you are judgement proof before you write to the creditor. If you are not sure, get help from a financial counsellor or one of the free services listed on our page Other support for debt and bankruptcy.

The creditor may still start court action. If so, get legal help.

Is the debt gone forever?

Not always.

If the debt is statute barred, or your bankruptcy period has passed, then it is probably gone.

However, if you are on Centrelink or WorkCover payments now, but get a job or recover and start earning later, then the creditor may be able to get back the money you owe them.

It's also important to know that the debt will get bigger because interest will be added, so you may need to pay back more than you originally owed.

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