securedpersonalloans.com.auA record of the thing behind the loan

Guide 4 of 5 · The thing taken

After the asset is taken

If an asset given as security is seized, section 102 of the National Credit Code says the lender must give you a written notice within 14 days, and must return the asset if the arrears (less any accelerated amount) and its reasonable enforcement expenses are paid within 21 days of that notice, with no further default of the same kind, or if the contract is paid out. After a sale, the lender must send a notice with the details, and it may take you to court for any debt left over.

General information, not financial or legal advice. To check the steps for yourself, read the National Debt Helpline’s page on personal loans.

Where the thing is: with the lender, or on its way to a sale

4.1Taking the thing is enforcement

Seizing the security is one of the steps the law holds back until a borrower has been warned. ASIC’s guidance lists taking possession of property and selling property among the enforcement steps a lender may begin only after giving a default notice under section 88 of the National Credit Code. Section 88 itself lists a few cases where no notice, or no wait, is needed. That notice, the wait it brings, and those cases are in the default notice and the wait before enforcement.

Once that wait is over, the sources describe two paths: one for an asset such as goods, and one for a home. For a home, Moneysmart’s starting point is that a lender must work through a specific series of steps before it can take the home.

4.2Two paths, side by side

An asset such as goods

As the National Debt Helpline describes it for a secured personal loan.

  1. After the notice expires

    The asset is seized

    If you are still behind, the lender may seize the asset, but it can’t seize assets from residential property unless a court orders it or you consent in writing.

  2. Within 14 days

    A notice to you

    You must be given notice within 14 days of the seizure.

  3. The next 21 days

    Time to get it back

    For 21 days after the notice the lender must not sell the asset without a court’s permission, and paying the arrears (less any accelerated amount) and its reasonable enforcement expenses in that time, with no further default of the same kind, has it returned.

  4. After the sale

    A notice of the sale

    The lender must send a notice after selling the security, giving you details of the sale.

  5. Then

    Any debt left

    The lender may take you to court for any debt remaining after the sale.

A home

As Moneysmart describes it for a home loan.

  1. After the 30-day default period

    Court papers

    The lender can serve a Statement of Claim or a summons, which starts legal action to claim the whole amount of the loan.

  2. A set number of days

    A defence or a dispute

    There is then a fixed period for filing a defence, or for taking the matter to a dispute resolution scheme, and its length differs between states and territories.

  3. If nothing is done

    Repossession

    The lender can take action to repossess the home.

  4. Eviction

    The debt goes on

    Eviction does not release you from the obligation to pay the loan. The lender may sell the home and recover any outstanding balance by taking further legal action.

4.3The 21 days, and what they measure

The National Debt Helpline describes the sum due in that window as the debt, including enforcement costs. Section 102 of the Code is more exact: the amount in arrears, less any accelerated amount, and the lender’s reasonable enforcement expenses; paying out the contract also brings the goods back.

The Code gives a debtor or guarantor a way to ask the lender for a statement of the amount owing. That statement, and the way to dispute an entry in it, are in disputing the amount, and the courts.

4.4When the thing does not cover the debt

Neither path ends with the sale. The National Debt Helpline’s words for goods are “any debt remaining after the asset has been sold”, which the lender may pursue in court. Moneysmart’s for a home are that the lender may “recover any outstanding balance” by taking further legal action. Security gives the lender a claim on the thing; it does not promise that the thing settles the account.

4.5What can still hold the path back

  • A dispute at AFCAThe National Debt Helpline says all enforcement action stops while an external dispute resolution scheme considers your dispute, and that you can lodge one even while being sued, as long as judgment has not been given. For a home, it says the lender can’t continue with enforcement, such as repossessing the home, while AFCA considers the dispute. If you accept the scheme’s decision, it binds the lender; if you don’t, you can still go to court, subject to any time limits.
  • An application to change the contractWhere a borrower has applied to a court under section 74 of the Code after a hardship notice, the court may stay enforcement proceedings under the contract until the application is decided. The steps before it are in hardship and changing the terms.
  • Time to sell a homeWhere hardship is not temporary and a home loan can’t reasonably be repaid, the National Debt Helpline says you can ask the lender for hardship assistance that gives you time to sell the home.