I'm at fault - Car crashes

1.  The amount claimed is fair and you can afford to pay something

You should arrange to pay the claim, either as a lump-sum (one off payment) or by making regular repayments over time.

• If you can afford to, paying the amount claimed in full is the quickest way to settle the debt.
• An insurer might accept a lower amount if you offer to pay it as a lump sum or in instalments.
• If you can’t afford to pay the claim in one go, try to negotiate a repayment in instalments. Make sure the instalment amounts are something you can afford.
• If you agree to pay the other driver or their insurer, make sure the agreement is in writing and states it is 'in full and final settlement of the claim'. This makes it clear that the amount you have agreed to pay isn't just a part payment.

Warning: The other driver or insurer do not have to accept any offer you make to settle the claim for a lower amount or to pay by instalments.

2.  The amount claimed is fair, but you can’t afford to pay anything

If you can’t afford to pay any of the amount claimed, you can write to the insurer or the other driver (if they are uninsured) to ask them to stop collecting the debt. 

• Explain your financial situation.
• Try to point out that if they take you to court, they may increase their costs and still not get any money from you.

An insurer may be willing to write-off the debt if you are ill or in financial hardship. Under the General Insurance Code of Practice, if the insurer agrees you are in financial hardship the insurer will work with you to come up with an arrangement that could include:

• an extension of time to pay the full amount of the claim
• payment of a reduced lump sum amount
• payment by instalments
• putting off some payments for an agreed period, or
• a combination of the above options.

You should get advice from a financial counsellor  or lawyer before writing to the insurer or other driver.

What if they don't agree to stop collecting the debt?

If you do not get a response, or your request to stop collecting the debt is rejected, you should get more legal advice.

• If the insurer does not respond to a financial hardship request, you can write to the Australian Financial Complaints Authority and lodge a complaint.
• If the other driver or insurer ends up with a court judgment against you because of the money you owe, they could try to take and sell your assets (including your home or car).

Bankruptcy

In rare circumstances, you may want to consider voluntary bankruptcy. However, there are very negative consequences of going bankrupt.

It is essential that you seek advice from a financial counsellor or a lawyer if you are considering voluntary bankruptcy.

3.  You dispute the amount claimed

If you were at fault, you would normally be responsible for:

• the costs to repair the damage to the other car (up to the market value of the car if it was written-off), and
• other related costs (such as towing, using a hire car).

The other driver or insurer can only recover costs that are fair in the circumstances.

Remember, the other driver or insurer does not have to:

• get more than one quote, or
• let you access the other car so you can do your own inspection or get your own quotes.

You can ask to organise an independent quote, but repairs may have already started or been completed on the other car. 

If you can’t reach an agreement about the amount claimed and it goes to court, legal costs and court costs may be added to the total amount claimed against you.

Useful documents

• Sample settlement agreement
• Letter to insurer asking to be released from a debt
• Letter to AFCA about an Insurance Code complaint
• Letter to insurer disputing the amount claimed
• Letter to insurer requesting documents

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