No, debt generally doesn't just disappear if you don't pay it; it usually grows with interest and can lead to serious consequences like legal action, wage garnishment, or bankruptcy, though some old debts become legally unenforceable ("statute-barred") after a certain time (around 6 years in most Australian states) if no payments or acknowledgments are made. Ignoring it allows it to worsen and damage your credit, but in rare cases, a debt might become legally uncollectible if it's very old and meets specific criteria, requiring legal advice.
A debt doesn't generally expire or disappear until its paid, but in many states, there may be a time limit on how long creditors or debt collectors can use legal action to collect a debt.
You might not have to pay an old unsecured debt if it has been more than 6 years (or 3 years in the Northern Territory) since you last made a payment or acknowledged the debt in writing. This is called a statute barred debt.
Creditors might start debt collection.
While you're in the debt settlement program, you may still get calls from debt collectors. You could even be sued while you're waiting for a settlement. If the company wins, it might be able to garnish your wages or put a lien on your home.
What Are the Consequences of Ignoring Debt Collectors? Having debt you can't pay is stressful, but dodging collection calls won't make the debt disappear. Rejecting your creditor's calls can make a bad situation much worse. And it can rob you of the chance to resolve debt and leave your financial stress behind.
If you're carrying a significant balance, like $20,000 in credit card debt, a rate like that could have even more of a detrimental impact on your finances. The longer the balance goes unpaid, the more the interest charges compound, turning what could have been a manageable debt into a hefty financial burden.
Special debts like child support, alimony and student loans, will not be eliminated when filing for bankruptcy.
The worst a debt collector can do, which is also illegal, involves using force, severe harassment (like calling at all hours, abusing you, or telling others about the debt), deception (fake court letters), threatening illegal actions (jail time, which isn't possible for most debt), or taking unfair advantage of vulnerabilities like age or illness; they can't trespass or take your property without a court order, but they can pursue legal action leading to wage garnishment, asset seizure, or bankruptcy as a last resort.
Taking action means they send you court papers telling you they're going to take you to court. The time limit is sometimes called the limitation period. For most debts, the time limit is 6 years since you last wrote to them or made a payment. The time limit is longer for mortgage debts.
There are several circumstances in which debt forgiveness can occur, such as government initiatives, financial hardship or debt relief programs. Lenders apply debt forgiveness in several ways, including through directly negotiated settlements or government programs.
Ignoring debt collectors in Australia leads to escalating consequences like credit score damage, increasing debt (fees/interest), potential legal action (court orders, seizure of assets, wage/bank garnishee orders), and in rare cases, bankruptcy or winding up your company, but you cannot be imprisoned for simply owing a debt (unless you defy court orders, which is rare). Ignoring demands means creditors can pursue court judgments, impacting future borrowing and potentially leading to property seizure or money taken directly from wages/bank accounts.
About insolvency solutions to legally write off debt
For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.
In short, debt collectors do not usually give up, at least not until they've exhausted every avenue to collect or sell your debt. When an account becomes seriously delinquent, typically after 120 to 180 days of missed payments, the original creditor often "charges off" the account, removing it from their active books.
Improving your credit in 30 days is possible. Ways to do so include paying off credit card debt, becoming an authorized user, paying your bills on time and disputing inaccurate credit report information.
For most debts, that time limit is 7 years from the date of the first missed payment. That means a debt you haven't paid in 7+ years won't show up on your credit anymore. ✅ BUT: That doesn't mean the debt is legally gone. It's just no longer visible on your credit report.
Use this 11-word phrase to stop debt collectors: “Please cease and desist all calls and contact with me immediately.” You can use this phrase over the phone, in an email or letter, or both.
If you have personal or commercial debts and they have been passed to a debt collection company to recover on behalf of the person you owe (your creditor), they will usually add fees to cover the extra time and resources required.
In general, debt collectors or creditors have 6 years from the date of your last payment or acknowledgment of the debt to file a lawsuit. This means if you haven't made a payment or admitted to owing the debt in that time, they may be out of legal options to collect through the courts.
Choose Your Debt Amount
Credit cards are convenient, but if you don't stay on top of them, your debt can get out of control. If your credit card debt has reached $30,000, that should be a big-time wake-up call.
Ignoring or avoiding the debt collector is also unlikely to make them stop contacting you, and they may use other methods to try to collect the debt, including filing a lawsuit against you.
Generally, borrowing to purchase depreciating assets is consider bad debt and one of the worst types of debt to take. Contrary to popular belief, car loans are usually in this category. Because vehicles are expensive commodities, you're likely to go for a financing loan rather than paying cash.
If you've been delinquent on your credit card payments for more than six months, creditors might charge off your debt, which means they write it off as a loss on their books. This makes the debt uncollectible from the original creditor — meaning that the card issuer won't be making further attempts to collect on it.
There is such a thing as a statute of limitations on debt, and old debts do generally drop off your credit record. Still, debt doesn't actually ever disappear. If you have unpaid liabilities, you'll continue to owe money for the rest of your life — and sometimes beyond that.
'Bad debt' is a term used for the loan amount that cannot be recovered and is written off by the bank.