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.

• Paying the amount claimed in full is the quickest way to settle the debt, if you can afford to do this.
• An insurer might accept a lower amount if you offer to pay it as a lump sum. They may also accept this lower amount to be paid in instalments.
• If you can’t afford to pay the claim in one go, you should try to negotiate a repayment arrangement. Make sure the instalment amount you offer is something you can afford.
• If you agree to pay the other driver or their insurer, make sure the agreement is in writing and states that 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 as 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) and 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 be able to 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 you are in financial hardship the insurer must offer you:

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

It is recommended that you get advice from a financial counsellor or legal advice 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 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 end up trying 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 are at fault, you would normally be responsible for:

• the costs to repair the damage to the car (up to the market value of the car if it was written-off)
• other 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 always ask if you can organise an independent quote, but repairs may have already started or been completed. 

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

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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