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Published: June 17, 2026
Options for people that owe money
When a community member owes money they cannot repay, it can feel like there are no realistic options.
Below we outline some of the options to resolve debts for low or no-income earners in financial hardship. We also provide some practical tips for supporting community members to negotiate with creditors.
It’s important to note that not all debts are the same. For example, money owed to the government are treated differently to debts owed to people or companies. They below information is only about debts to private companies.
Question whether the money is owed
A person or company may contact a community member to request payment for a debt that is not legally owed.
There are a number of reasons why a community member may not legally owe the amount requested. Below we’re provided some more information about common reasons we see through Homelessness Law.
The Debt Is Too Old
The law sets a time limit for a person or company to take action to recover an alleged debt. If no action is taken within this period, the debt becomes statute barred.
A debt is statute barred when the legal time limit for recovery has expired. This usually occurs when, over the past 6 years, no payments have been made, the debt has not been acknowledged in writing, and the creditor has not begun court proceedings. In most cases, creditors cannot enforce statute‑barred debts.
Frontline workers can request documents from creditors and check the dates of the last payment, any written acknowledgment, and any court action to confirm whether the debt is still enforceable or outside the six‑year limit.
Consumer Protections Can Reduce The Amount Owed
Australia’s consumer protection laws safeguard people from unfair contract terms, unfair business practices, and irresponsible lending. These laws also give consumers clearer pathways to resolve disputes when something goes wrong.
If a company fails to meet its obligations under these laws, the amount a consumer owes may be reduced. For example, if a creditor breaches responsible lending obligations—such as approving a loan when the repayments were clearly unaffordable—the consumer may be able to dispute part or all of the remaining debt.
Assessing whether a business has breached its consumer protection obligations can be complex. If someone believes a company is trying to enforce a debt they should not reasonably have to pay, they should seek advice from their local community legal centre.
Fraud, Violence or Identity Theft
A community member may be contact about an alleged debt for a product or service they did not agree request.
For example, a small loan may have been taken out in the community member’s name but they did not receive the money.
If a community member believes they are not responsible for the debt, you can ask the company for evidence that the consumer was the person that entered the agreement.
If you’re contacting a company about an alleged debt, be careful not to say that the debt is owed or acknowledge liability for the alleged debt.
When referring to the amount they say is owed, you can simple call it the ‘alleged debt’. You can also ask for information or documents about the community members account, rather than a debt.
At Homelessness Law, we often include a brief statement in our emails or letters that directly addresses this point:
“Please note that in requesting these documents, we do not acknowledge liability for any amount alleged to be owed.”
Requesting a reduction or waiver of a debt
If a community member has little or no capacity to pay the alleged debt, the company may agree to waive or write off the amount they say is owed.
Companies may agree where the person has low income, no significant assets of financial value, and limited future earning potential.
Why Would a Company Waive a Debt?
It can be in a company’s business interests to waive or write off a debt they are unlikely to recover.
Debt collection and legal action can be costly, and there are limits on what a creditor can do to force repayment. For example, a person’s Centrelink income and essential household items are protected from enforcement.
People on low incomes or government benefits who do not own assets of significant financial value are sometimes described as ‘judgment proof’. This means that even if a company obtains a court judgment, it may not be able to enforce it because the person’s financial circumstances offer no realistic avenue for recovery.
If a company concludes that the cost of pursuing the debt outweighs the amount they are likely to recover, they may decide to write off or waive the debt.
What Information Should I Provide?
If you are requesting a waiver, the information you provide will depend on the community member’s circumstances and what they are happy for you to share.
We recommend providing information about the person’s financial circumstances (income, expenses, assets, and other debts), as well as any personal hardship that is likely to impact the person’s earning capacity in the future.
When requesting a waiver, we aim to provide the company with enough information about the individual’s circumstances that it can be satisfied that further debt recovery action is not likely to result in payment and that this is unlikely to change.
If the community member can afford some repayment or their circumstances are likely to change in the future, a full waiver may not be an option.
What Else Should I Be Aware Of?
While there are limits to enforcement of debts against people in financial hardship, there are things that a company may do that can impact a community member.
Some companies are allowed to list a default on the person’s credit history. They may have already done this or may offer to waive the debt but list a default.
Some companies will refuse to offer services to the community in the future. For example, a small loan or buy-now-pay-later provider may agree to the waiver but not offer further loans.
There is also a small chance that a company may commence legal proceedings to protect its legal rights. If they get judgment, it can extend the time they have to collect a debt.
Steve is in his early 50’s and has been off work for the last 4 years. He has multiple health issues that stop him from working. His only income is Centrelink and he’s living in supported accommodation.
While working with Steve, he tells you he’s been contacted by some debt collection companies about a number of debts. He fell into debt after being evicted from his tenancy.
Working with Steve, you write to the companies to request information about his accounts and the alleged debts. Most of Steve’s debts are with small loan providers. You contact the companies to explain Steve’s financial position and to provide information about his health issues. You explain that he doesn’t own anything of financial value, only receives Centrelink and that this is unlikely to change. You ask them to waive the alleged debt and stop any further collection activity.
Based on the information you provided, each company agrees to waive the alleged debts.
Delays, Holds and Payment Plans
If a community member expects their financial situation to improve, they can request a payment plan or hardship variation. This may involve:
- Negotiating a payment plan – making smaller, regular payments.
- Requesting a reduction on the current payment plan – reducing repayments.
- Requesting a hold (“freeze”) – pausing repayments and interest for a set period.
These options can give breathing space and help community members avoid further collection action. Frontline workers can help draft and submit hardship requests to creditors, ensuring repayment amounts are affordable. Please note however that this is not necessarily the best outcome, especially where a full debt waiver may be available.
Do Nothing
Some community members may choose to do nothing and ignore a debt. We do not recommend this approach.
Creditors will usually pursue payment through calls, letters, or debt collectors. They may also apply for court orders to garnish wages, seize property or in some cases apply for bankruptcy, though this is costly and less likely for low-income community members. Doing nothing may also lead to defaults on the community member’s credit report, added interest and enforcement costs, and ongoing stress from collection activity.
