Car Accident Debt

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Overview

Car accidents can be very expensive, especially if you’re at fault and you don’t have insurance. If you’re having issues with a car accident debt, this page explains the steps you should take to resolve it.

If you’ve had a car accident, are at fault, and aren’t insured, the other party’s insurance company may demand payment for their loss – and that could be a lot of money. Insurance companies are obliged to act fairly and to reasonably consider repayment arrangements if you’re in financial difficulty.

If you’re worried about what will happen if you don’t pay off the debt, or if you go bankrupt, scroll to the bottom of this page and read the ‘What happens if?’ section.

If you’ve completed all the steps and your problem still hasn’t been solved, or you’re feeling overwhelmed, call us on 1800 007 007 to speak to a financial counsellor.

If you’d prefer to chat to a financial counsellor online, you can use our live chat service by clicking the chat icon in the bottom right corner of your screen.

If you have a car accident debt follow these steps.

VIEW THE STEPS

Steps to take to sort out a car accident debt

01

Seek legal advice if you’re not sure whether you’re responsible for the damage

If you’re not sure you’re responsible, don’t admit liability. Get legal advice immediately.

If you have had a car accident but don’t know what to do next, the Motor Vehicle Accident Problem Solver is an interactive tool with step-by-step guides to help you plan your next move.

02

If you have insurance claim on that insurance

If you have insurance and are not sure whether you can claim just contact your insurer and make a claim.

Get legal advice if you have made a claim and the claim has been rejected.

If you can claim but cannot afford to pay the excess upfront because you are in financial hardship, then you can ask your insurer for an arrangement to repay your excess by instalments. You can also ask the insurer to deduct the excess from any payout you receive.

The insurer cannot refuse to process your claim because you failed to pay the excess. If your insurer won’t agree to a reasonable repayment arrangement, then you can make a free complaint with the Australian Financial Complaints Authority.

03

Make sure the amount being claimed is reasonable

If you accept that you’re responsible, you still need to be satisfied that the amount being claimed is reasonable. Ask the insurance company or debt collector for copies of:

Repair invoices
Any towing costs (if claimed)
Detailed invoices for hire car costs (if claimed)

The insurance company isn’t obliged to get more than one quote, let you choose a repairer, or find the lowest quote. The repair costs only need to be reasonable.

If you want to dispute the amount claimed, write to the insurance company or debt collector setting out your reasons. For example, you might dispute a repair of car parts that were not damaged by you.

Only continue to the next steps if you’re satisfied with the amount being claimed from you. Get legal advice if you cannot resolve a dispute on the reasonable repair costs.

04

Contact the insurance company or debt collector

If you accept responsibility and are satisfied with the amount being claimed, contact the insurance company or debt collector that’s claiming the money from you.

If you can pay or almost pay, you can often negotiate a discount on the amount claimed (called a reduced lump sum settlement). Make sure that if you do negotiate a reduced lump sum settlement, you clearly confirm in writing that the payment is in “full and final settlement”.

If you can’t pay, tell the insurance company or debt collector that you’re in financial hardship. The insurance company and debt collector have obligations under the General Insurance Code of Practice for people in financial hardship. Once you ask for financial hardship support the insurance company must put recovery action on hold until your application has been assessed and you have been notified of their decision. You need to be prepared to provide reasonable information and evidence about your financial situation if requested.

Possible arrangements are:

delaying the date for when payment must be made
paying in instalments
paying a reduced lump sum amount
delaying one or more instalment amounts
a debt release (This may only be possible if you can show you can’t pay the debt in the foreseeable future. Usually this is because you’re receiving a Centrelink income, have no significant assets and this situation is unlikely to change.)

TIPS

Work out what you can afford to pay before contacting the insurance company or debt collector.
Call us if you are not sure how to negotiate a financial hardship arrangement with the insurance company

05

Speak to one of our financial counsellors

If you’re feeling overwhelmed and need some help to deal with your financial hardship, you can speak with one of our financial counsellors.

Financial counsellors aren’t judgmental about your circumstances – they’re here to offer you free, confidential and independent advice and assistance.

To speak to a financial counsellor you can:

Call the National Debt Helpline on 1800 007 007 – open Weekdays from 9:30 am to 4:30 pm.
Use our live chat service by clicking the chat icon in the bottom right corner of your screen. Live chat is available 9:00 am to 8.00 pm weekdays. If you send a message outside these hours a financial counsellor will get back to you.
Make an appointment to see a financial counsellor in your local area – Find a local Financial Counsellor.

What happens if?

I don't pay

If you don’t pay, the insurance company can:

Contact you and ask you to pay the debt
Use a debt collector to collect the debt from you
Sell the debt to a debt collector
Take legal action against you in Court
If a court judgment is obtained, the debt can be enforced and interest charged

The insurance company cannot charge interest on the debt until they obtain a court judgment. The insurance company cannot list on your credit report for the debt.

I go bankrupt

In most cases, car accident debt will be wiped out by bankruptcy – but make sure the accident is ‘liquidated’ first. This means the insurance company must have issued you with a bill for a specific amount, you must have accepted liability for the debt, and this should be in writing.

Under s.137 of the General Insurance Code of Practice, the insurance company is required to work with you to agree an amount owed and provide written confirmation of that amount to use for your application for bankruptcy.

Get advice first before you consider bankruptcy. Please contact us on 1800 007 007 and speak with one of our financial counsellors before going down this path.

KNOW YOUR RIGHTS

INSURANCE COMPANIES MUST ACT FAIRLY

If an insurer has signed the General Insurance Code of Practice, they must consider flexible payment arrangements if you’re experiencing financial difficulty because of illness, unemployment or another reasonable cause. You can check the General Insurance Code of Practice here.

If an insurer has signed onto the General Insurance Code of Practice, then you have certain rights.

Parts 9 (vulnerable customers) and 10 (financial hardship) of the General Insurance Code of Practice hardship started to apply on 1 January 2021. The remainder of the Code starts on 1 July 2021.

The requirements in the General Insurance Code of Practice also apply to any debt collector or solicitor being used by the insurance company to collect the debt.

Telling the insurance company, you are in financial hardship

If you tell the insurance company you are in financial hardship then they must give you a form for you to apply for Financial Hardship support. You may also be advised to ring us at the National Debt Helpline.

Providing information and evidence of financial hardship

The insurance company will consider all reasonable evidence. For example:

evidence of a serious illness that prevents you from earning income
evidence of a disability, including a disability caused by mental illness
evidence that you are on Centrelink (a Centrelink Income Statement)
evidence that you are unemployed

The above list are examples only. There are many reasons for financial hardship. The insurance company may not ask for any evidence. If you are having trouble getting evidence explain why.

The insurance company may ask for more information. If they do it is recommended you provide the requested information. You should provide the requested information within 21 days of the request. If there is a delay explain why.

Recovery will be put on hold

All debt collection must be put on hold once you tell the insurance company (or their debt collector or solicitor) that you are in financial hardship (for the first time). This means that debt collection will stop.

The debt collection remains on hold until the insurance company has assessed your application for Financial Hardship and notified you of their decision. The decision is made within 21 days of your application for financial hardship (but may be extended if the insurance company is waiting for further information from you).

If the insurance company agrees to financial hardship support

If the insurance company agrees that you are entitled to financial hardship support it will work with you to make an arrangement.

Examples of arrangements include:

delaying the date for when payment must be made
paying in instalments
paying a reduced lump sum amount
delaying one or more instalment amounts
a release from the debt

The insurance company agrees not to refuse a reasonable request from you to pay the amount owed in instalments.

Release from the debt

You can ask to be released from the debt owed. There is no obligation on the insurance company to agree to a release.

To maximise your chances of getting a debt release you will usually need to show that you are in financial hardship for the foreseeable future and you:

do not have any significant assets
you are on a low income (and are likely to remain on the low income)

If the insurance company decides you are not entitled to financial hardship support

The insurance company must give you the reasons for their decision and their complaints process.

Call us for advice if this happens.

ACCC/ASIC Debt Collection Guideline

The insurance company must comply with the ACCC/ASIC Debt Collection Guideline. This guideline protects you from unfair treatment in debt collection.