Case study 2: insurance debt (judgment proof)

Megan’s insurance debt (judgment proof)

Megan’s circumstances

Megan was a 24 year old woman whose mental health had been deteriorating since her late teenage years. She had moved back in with her mother and her sole source of income was a Disability Support Pension. Her mental illness severely constrained her ability to care for herself and earn an income.

Megan’s instructions

In 2009 Megan had a car crash while driving her uncle’s car.  The car wasn’t insured, so the other party’s insurance company was pursuing Megan for the $18,000 that they’d had to pay their driver.

The insurance company had sold the debt to a debt collection agency.

A few months after the car crash Megan had a psychotic episode that left her hospitalised and with a suspected acquired brain injury. She was later diagnosed with schizophrenia.

Steps taken in Megan’s matter

Megan’s Homeless Law lawyer contacted the debt collection company and put them on notice that Homeless Law was acting for Megan and that she was a vulnerable individual.  Homeless Law used the letter below, which attached the Authority to Act, to ask the debt collector to put a hold on enforcement and told them to contact the Homeless Law lawyer, rather than Megan in relation to this matter.

The debt collectors agreed to put further enforcement action on hold while Homeless Law was getting instructions from Megan.  The Homeless Law lawyer asked them to make a note of this on the system.

The Homeless Law lawyer then (with Megan’s express consent) sent the letter below to Megan’s treating psychiatrist, requesting a medical report to support her application for waiver of the debt.

Finally, the Homeless Law lawyer sent a letter to the debt collection company, requesting a waiver of the debt on the basis that: Megan’s only source of income was her Centrelink payment; her only asset was a car worth less than $5000; she was experiencing significant financial hardship; and was simply not able to pay the debt.

The report from the psychiatrist supported the fact that Megan’s capacity to earn and income in the future was also very limited i.e. it was highly unlikely that Megan would ever be able to repay this debt.

Furthermore, the stress of being pursued for this debt was exacerbating Megan’s already fragile mental health.



On the basis of Homeless Law’s letter and the psychiatrist’s report, the debt collection company deemed Megan to be “un-financial” and referred the matter back to the insurance company.

The insurance company also waived the debt on the basis of Megan’s hardship and her inability to pay.  Homeless Law asked the insurance company to confirm this in writing, which they did.

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