How to deal with overwhelming debt

Struggling with debt and money problems is tough, however, the worst thing you can do is ignore this issue and hope it goes away. Leaving it too long may limit the options you have.

Money problems can happen to anyone. Your income might have dropped because you retired, you had your hours reduced or even lost your job. Working to bring your debts back under control will be difficult and demanding, but necessary, even if you think your situation is hopeless.

Prioritise your debts
When you have limited income you soon realise the consequences are more serious if you don’t pay certain debts.

The size of the debt and the emotion attached to a possession or key asset (like the roof over your head) are factors that help you decide the relative priority of your debts.

By understanding your debts and your payment options and the legal consequences of not paying, you’ll be able to prioritise which debts to pay first. If you at least pay something towards your outstanding debts, your creditors may delay action against you and give you the opportunity to deal with the debt. The options available include:

  • applying for a hardship variation from your bank, utility companies and credit contracts to either reduce repayments, defer payments, or extend the term of your loan
  • checking to see if you have insurance that applies to your debts and loans
  • negotiating with your creditors
  • accessing your superannuation early to obtain a lump sum to pay off large, priority debts.

Watch out for ‘debt vultures’
If you are struggling with overwhelming debt you are not alone. A study released recently by the University of NSW found that nearly two million Australians are experiencing high financial stress.

As a result, there are now companies cashing in on this. You might have seen them spruiking their wares on TV, radio and online, promising to help Australians with financial problems.

Beware – these companies are not all that they seem. We call them ‘debt vultures’ because they prey on financially struggling Aussies with promises they can’t keep, hidden fees and, in some cases, leave people even deeper in debt. They offer services such as ‘credit repair’, ‘budgeting services’, ‘debt agreements’ and ‘debt negotiation’. While the slick advertising may promise a ‘life free from debt’, the reality is that this is a largely unregulated industry, with little or no protection for when things go wrong.

Get independent assistance
There is an alternative, available to all Australians. Financial counsellors provide a free, confidential and independent information service for people experiencing difficulty paying their bills including mortgages and day-to-day living expenses.

While you may feel embarrassed about seeking help, our National Debt Helpline phone counsellors don’t judge our callers’ circumstances, they just want to help and are professionally trained to offer assistance.

For help please go online or call 1800 007 007, Monday to Friday, 9.30am – 5pm.

Related articles:
Avoiding debt disaster
Do your debts die with you?
Is debt ruining your retirement?

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