Understanding family debt

Family debt occurs when an adult family member asks another family member, often a parent, to:

  1. Borrow money on their behalf. If you do this then you owe the money to the creditor; or

  2. Act as the guarantor of one or more loans. If you do this you’re guaranteeing the loan repayments will be made.


In either circumstance you need to be aware that you’re responsible for the debt if the family member is unable or refuses to make the payments.

What to do before agreeing

Before you agree to either borrow money on someone else’s behalf, or guarantee a loan, you should be aware of the consequences.

  • It’s important to obtain legal advice to ensure you are aware of the legal consequences of becoming a guarantor before signing any documents.

  • Do not sign documents you do not understand.

  • Access Financial Counselling to be sure you will be able to cover the payments if required, without putting yourself into financial distress.

  • Check if there are other loans, with lower interest rates and/or fees which may be more suitable.

  • Decide if the loan is absolutely necessary – can the purchase be delayed until the family member can make the payments themselves.

  • Be honest with your family member if you believe you cannot cover the debt or do not wish to proceed.

  • If you think that you or someone you know could be the victim of elder abuse, including financial abuse, contact the Elder Abuse Prevention Unit.

Preventative measures

There are steps you can take to avoid family debt causing you financial distress.

Contact your creditor
As soon as you know you cannot pay your debt contact the creditor and let them know. Remember, they can’t help you if they aren’t aware of your situation.
Ask for financial hardship consideration
Ask for reduced payments, reduced interest or additional time to pay due to financial hardship. Legally, creditors must consider your request.
Return secured property
If possible, return the property if you can no longer make the repayments. Although you will still be responsible for the balance of the debt, it may be less if the property has been returned.

Additional information


In any legal matter, it’s best to get legal advice from Legal Aid Queensland on 1300 651 188

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