Can I lose my debt if I’m behind on my debt?

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It is possible to lose your home if you cannot make your debt repayments. Its best seek help as early as possible to avoid eviction. However, you cannot be evicted right away. There’s a process that must be followed, and notices that must be issued first. Read on below to find out more.  

What is repossession?

When you decided to buy a home, you probably borrowed money from a lender. The lender would have taken a debt over the debt you bought to secure the home loan. The lender does this so they can take your home as security so that it can be taken from you and sold if you do not keep to your home loan contract with the lender. This is called repossession, and can happen when you are behind on your debt repayments.

The legal process:

Before they can start legal action against you, lenders must:

  • Give you a default notice – Your lender can send you a default notice the day that your repayment becomes overdue. This default notice will give you 30 days to make the payments you’ve missed, as well as the regular repayment due on your loan. A default notice must specify the amount you are behind in repayments and cite the action required to fix the default.

A default notice should also explain that the repossession and sale of the debtd property may not repay the entire debt, and also include information about your right to give a hardship notice. Your default notice should outline your rights to complain to the Australian Financial Complaints Authority, before explaining what may happen if the default is not fixed within the period stated. It may still be possible to apply for a hardship variation at this stage.

  • Serve a Statement of Claims – After the 30 day default period has passed, your lender can serve you with a Statement of Claims. This means that legal action is beginning against you. You do have a set number of days to file a defence or lodge a dispute. Depending on your state, the exact number of days may differ. If you choose not to take any action, your lender can begin the process of repossessing your home.

Once these steps have been taken, eviction is possible. If your lender gets a court order to repossess your home they will send you a Notice to Vacate. After what is usually a period of 30 days, a sheriff will come to your home, evict you from the premises and change the locks. It’s important to note that this process does not release you from the obligation to repay your loan. Your lender may sell your home and recover any outstanding balance by taking further legal action against you.

*Disclaimer: This article contains general comments and recommendations only. It is not intended to be and should not be construed as legal advice. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action, you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs.

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