In short
A missed payment is not a crisis and it is not nothing. It is a default, and what you do in the following weeks matters more than anything in the agreement.
If you end up enforcing, there is a sequence. Where the National Credit Act applies you must deliver a section 129 notice and wait before approaching a court. Holding a bond does not let you take the property — it lets you ask a court to have it sold. Realistically the whole process is measured in many months, and the costs come out of what you recover.
01The first conversation
Before anything legal: find out which of these you are in. They look identical on lesson one and they are completely different problems.
| What it is | What it looks like | What it needs |
|---|---|---|
| An administrative slip | Payment arrives days later with an explanation that checks out | Nothing. Note it. |
| A timing problem | The borrower has the money coming and can say exactly when | A written variation, with a date |
| A deteriorating borrower | Explanations that change, or arrive late | Attention now, while there is still something to recover |
| A failed borrower | No contact, or no capacity to pay at all | Formal steps, promptly |
02The statutory sequence, where the Act applies
Where the National Credit Act governs the loan, you may not commence legal proceedings to enforce it before giving the borrower the notice required by section 129 and meeting the further requirements of section 130.
| Requirement | What it means |
|---|---|
| Default period | The borrower must have been in default for at least 20 business days |
| The section 129 notice | Delivered, proposing the matter be referred to a debt counsellor or ombud |
| After the notice | At least 10 business days must have passed since delivery |
| The borrower's response | They must have ignored it, or rejected your proposal |
Roughly a month before you may start. There are exceptions in section 130(2), and the requirement does not apply where the agreement is already subject to a debt restructuring order.
Where the Act does not apply — much lending to businesses — those steps do not bind you. Your agreement's own notice provisions still do, and they are usually stricter than people remember. Read the default clause before you rely on it.
03What holding a bond actually lets you do
Not seize the property. Three things have to happen, and each is a separate decision by a court.
- Judgment for the money. You sue and obtain judgment on the debt.
- A declaration that the property is specially executable. Winning a money judgment is not permission to sell the house. The court has to declare that property executable, separately, and it weighs that up rather than rubber-stamping it.
- A sale in execution by the sheriff. Where the property is the borrower's home the court will ordinarily fix a reserve price below which the sheriff may not sell.
The reserve exists to stop a giveaway auction. Its practical consequence for a lender is that the property may simply not sell at the first attempt — and then you wait, holding the costs, for the next one.
04Time and money
Honest figures are hard to generalise, but the shape is consistent and it is worth seeing.
- Before you can start: roughly a month on a covered loan, and whatever your agreement requires on one that is not.
- Getting to judgment: months, and longer if it is defended.
- Declaring executable and setting a sale: more months.
- The sale itself: possibly twice, if the first attempt fails to meet the reserve.
- Your costs: attorneys, sheriff, advertising. Spent as you go, recovered out of the proceeds if the proceeds stretch that far.
05The clock, in one table
| The debt | Prescribes after |
|---|---|
| An ordinary debt, including an unsecured loan | Three years |
| A debt secured by a mortgage bond | Thirty years |
| A judgment debt | Thirty years |
That ratio is the practical answer to why registering a bond matters beyond the security itself: it changes the life of the debt from three years to thirty. It is also why a judgment can be worth obtaining even against a borrower with nothing today — thirty years is a long time for somebody's circumstances to change.
Prescription can be interrupted or delayed, and section 11(d) itself opens with a saving for other Acts of Parliament. Three years from due date is the starting point, not a promise that the debt has gone.
Next: the documents that make all of this possible, and the clauses that cannot be written.