What is temporary debt protection (TDP)?

5 min read

What happens when you apply for temporary debt protection?

You receive protection

Once we accept your application, temporary debt protection provides a 21 day protection period in which unsecured creditors (including sheriffs) can’t take enforcement action to recover money you owe them. This means they can’t garnish your wages or have the sheriff/bailiff seize your goods.

You can use this time to:

seek advice from a free financial counsellor – see Where to find help
negotiate a payment plan with your creditors. You can do this yourself or authorise someone else to negotiate on your behalf
consider if any of the formal insolvency options would be right for you – see What are my options?

Once your TDP is accepted, you cannot apply for temporary debt protection again for 12 months.

Note: If you are having difficulty with your taxation or superannuation obligations, including debts due to COVID-19, you should seek advice from the Australian Taxation Office (ATO). The ATO offers a range of COVID-19 support mechanisms.

Some goods can still be repossessed

Secured creditors can still repossess any assets they hold a security over (such as a house under mortgage), if you can’t make repayments.

Some debts are not covered

Temporary debt protection does not apply to some types of debt. These include child support, HELP debts, and fines imposed by a court.

Creditors can use it to bankrupt you

It doesn’t stop your creditors from lodging a creditor’s petition with the court to make you bankrupt.
TDP is an ‘act of bankruptcy’. This means a creditor could use the fact you have lodged a TDP as the basis for an application to the court to make you bankrupt.

Creditors can still take some actions

Your creditors can still contact you to seek payment
They can take – or continue – legal action to recover the debt

You are not made bankrupt

It doesn't automatically make you bankrupt. After 21 days, if you do not apply for bankruptcy, creditors can continue to pursue you for the debts.

It is not recorded on the public register of personal bankruptcies

The details of your TDP do not appear on the National Personal Insolvency Index (NPII).

Who can apply for temporary debt protection (TDP)

You can apply for TDP if you have debts you can’t pay. Usually people apply for TDP if unsecured creditors are taking enforcement action.

Some people are not eligible for TDP. This includes people who:

have had a TDP accepted in the last 12 months
are currently in an active debt agreement or personal insolvency agreement
have been served with a Creditor’s Petition that has been filed in the court.

Case study: Julia

Temporary relief from enforcement action by a creditor

Julia is a small business owner who runs a café. The café has been hit hard by the economic impact of the coronavirus. Until recently, Julia had always been able to make on-time payments to her creditors, like her bank and suppliers.

Like most cafés across Australia, Julia’s has only been able to sell takeaway coffee and food. Her revenue has more than halved and she has been unable to pay her creditors.

Most of Julia’s creditors have been supportive and negotiated new payment terms with her. However, one creditor didn’t and instead obtained a court judgment against her.

The court’s judgment allows a creditor to apply for enforcement processes for the judgment debt, which could mean Julia’s assets are seized and sold to pay off her debts.

Julia contacted the National Debt Helpline for free financial counselling.

After speaking with the financial counsellor, Julia decided to apply for Temporary Debt Protection. Once the application was accepted, this stopped the creditor from enforcing the judgment – meaning her assets weren’t seized – for a period of 21 days.

Julia used the extra time during the temporary debt protection period to restructure her finances and enter an affordable repayment plan with the creditor.

Important information

AFSA encourages anyone considering entering into Temporary Debt Protection to first seek advice from a free financial counsellor by calling the National Debt Helpline on 1800 007 007.

*These case studies do not constitute legal or financial advice. You should consider whether the options referred to in the case studies are appropriate for you, and seek advice if necessary, before taking any action.

How do I apply for temporary debt protection?

If you understand the consequences of proceeding with temporary debt protection and think this is the right option for you, you can apply by lodging a temporary debt protection form.