For Kim Forrest and her husband, money has always been tight, but they have managed and, until recently, believed they were on track for retirement.

Key points: People can end up being bankrupted over debts as small as $5,000

People can end up being bankrupted over debts as small as $5,000 Consumer advocates are alarmed by the number of clients with small debts taken to court by Lion Finance

Consumer advocates are alarmed by the number of clients with small debts taken to court by Lion Finance Last financial year Lion Finance filed 512 bankruptcy cases, just shy of the 543 filed by the ATO

The Forrests had a mortgage and several other debts, but it was a $9,600 credit card debt that threatened to undo it all.

In March, Ms Forrest said she received letters from organisations offering to assist the couple with their bankruptcy.

The word "bankruptcy" was news to her.

"I just rang them and I said, 'What's going on? What's this bankruptcy about?'," she said.

"And they said, 'well you'd better ring Lion Finance'."

Ms Forrest learned the couple's only asset, their home, could be put in the hands of a trustee unless they came up with thousands of dollars in 21 days.

Kim and Steven Forrest, now 55, have been together since they were teenagers.

They raised their five children in public housing just outside Newcastle while Ms Forrest worked as a chef and her husband drove trucks.

"We've never had any money. We're happy without money because we've got each other. It's never, ever about money," she said.

They survived the collapse of their small transport business in the late 90s and bought their modest home when they were in their 40s.

"This was our very first home. It's just amazing this house, we love it, it's home," Ms Forrest said.

The Forrests' home in regional New South Wales. ( ABC News: Brendan Esposito )

About five years ago, they bought a bed and a washing machine using a credit card with an interest-free period.

They continued using the card for several years. When the interest-free period expired, Ms Forrest said they began paying an interest rate of nearly 30 per cent.

When she was injured and forced to drop out of the workforce, managing their finances became a struggle.

Along with their mortgage, there were bills and other ongoing direct debits, including their car finance. They were churning through the one wage they had coming in.

"It's very, very tough. I mean we had two wages coming in for years," Ms Forrest said.

"Now it's just Steven, he's the sole breadwinner which is pretty hard."

As they battled to keep up, their repayments to the credit card debt became irregular and eventually stopped.

In May 2018, the credit card company sold the debt to collector Lion Finance — a common practice in the banking sector.

Debt collectors pay less than the debt is worth for the chance to chase down the entire sum, while the bank gets part of the loan paid out rather than writing off the full amount or waiting years to recoup payments.

Once the debt collector took over the couple's debt, Ms Forrest re-commenced repayments at $50 a week.

But in September 2018, Lion Finance, owned by the publicly listed Collection House Limited, took the first step in the legal process to recover the debt.

In court, the debt collector claimed Steven owed more than $11,000.

Australians can be bankrupted over small debts

In Australia, an individual can be sued for bankruptcy for an unpaid debt of as little as $5,000.

Last year, consumer advocates became increasingly alarmed by the number of clients being taken to court over relatively small debts by one company in particular — Lion Finance.

They decided to do some research, analysing court lists over the past four years. Their data, released exclusively to the ABC, backed up their suspicions.

Kim Forrest worked as a chef before being injured. ( ABC News: Brendan Esposito )

"Lion Finance stands out as the debt collector using bankruptcy proceedings so much more frequently than any other debt collector in the market that it's absolutely astounding," Financial Rights Legal Centre's Karen Cox said.

When it comes to the number of bankruptcy cases filed in the past financial year, Lion Finance was not far behind the Australian Tax Office (ATO).

But while the ATO halved the number of people it sued for bankruptcy from 1,215 in the 2015-16 financial year to 543 in last financial year, Lion Finance increased its cases from 182 to 512 people in the same period.

"Whereas most debt collectors ... have been using bankruptcy proceedings less and less, Lion Finance has been a growing user, the numbers of bankruptcies are just going through the roof," Ms Cox said.

Ms Cox said bankruptcy would normally only be used if the debtor had an asset like a house.

Lion Finance declined the ABC's request for an interview, but in a statement from its parent company Collection House Limited said it made every effort to avoid legal action.

"We encourage customers to engage with us so we can discuss and assess their financial circumstances and avoid the legal process," it said.

The company would not comment on individual cases, but said its approach was different for vulnerable customers and "those assessed as having the capacity yet an unwillingness to engage with us to meet their financial obligations".

Bankruptcy should be a 'last resort'

Once an individual is made bankrupt, their assets are taken over by a trustee and sold to pay off their debts.

The trustee also charges the debtor tens of thousands of dollars.

"Bankruptcy proceedings should be used as a last resort, [because] the impact on the debtor of bankruptcy proceedings is profound," Ms Cox said.

"They will not be able to travel overseas without the permission of the trustee.

"In some cases, their employment may be limited [and in] some occupations, you are not allowed to continue as a bankrupt."

Steven Forrest spends his life on the road, driving his truck between Queensland and New South Wales. ( ABC News: Mary Lloyd )

Kim Forrest is often home by herself while her husband is on the road. ( ABC News: Brendan Esposito )

In Steven and Kim's case, their home would be sold by the trustee to pay off their credit card debt.

"You can't explain how frightening that is. To know that they can take something away like our house," Ms Forrest said.

"Then it's embarrassing. You work hard ... and at our age we'd never be able to start again."

Lion Finance said its focus was always on helping customers "rehabilitate their finances, enabling them to get back on the road to financial freedom".

As well as Lion Finance, Collection House Limited owns legal practice CLH Lawyers, which prosecutes its bankruptcy claims.

The company adds costs during the process, which can triple the amount owed by debtors within months.

"A debt of $5,000, by the time you get to creditors' petition can easily be $10-15,000, with the addition of interest and legal fees," Ms Cox said.

In 2017, Collection House's half-year report described how it was "tightening up" its legal process and taking a "firmer but fair position with customers who refuse to meet their obligations".

Put simply, it was going to start suing more people for bankruptcy.

According to the company, the benefits of this tactic were that it:

"Significantly increases the number of accounts that will be actioned"

"Significantly increases the number of accounts that will be actioned" "Encourages customers to take obligations and contact seriously"

The tactic worked to recover Kim and Steven's debt, but the couple said the experience felt far from fair.

"I've heard of blokes with a credit card debt and their wages are garnished," Mr Forrest said.

"Why didn't that happen? Why did it go straight to bankruptcy?

"Bankruptcy's a pretty big thing, well it is to me."

Steven Forrest and his wife were facing bankruptcy after being unable to meet the minimum repayments on their credit card. ( ABC News: Mary Lloyd )

'They have no moral code'

Over the past few months, the ABC has spoken to 22 people across Australia who have been sued for bankruptcy by Lion Finance.

The people the ABC spoke to described the company as aggressive, difficult to negotiate with and determined to litigate.

Some had lost their homes. Others borrowed tens of thousands of dollars from family or friends to stay afloat.

Almost everyone was too ashamed to speak publicly. NT Parliamentarian Jeff Collins was not.

As a former commercial barrister, union representative and firefighter, Mr Collins was used to having a powerful voice.

Northern Territory MP Jeff Collins was sued for bankruptcy by Lion Finance. ( ABC News: Brendan Esposito )

Although he has had financial trouble before, nothing prepared him for his encounter with Lion Finance.

"They have no moral code," Mr Collins said.

His story goes like many others: a marriage break-down, coupled with spiralling debt and a credit card he failed to keep on top of.

"I was earning good money, but I was also paying back a lot of debt," he said.

He defaulted on his credit card, which he ran up to $5,950, and BankWest sold the debt to Lion Finance in March 2014.

Nearly two years later, after failed repayment negotiations, Lion Finance took him to court, which ordered $100 a fortnight be taken from his wages.

When he was elected to the NT Parliament in August 2016, the company was told of his new circumstances.

The NT Parliament House building in Darwin. ( ABC News: Brendan Esposito )

Seven weeks later, in October the same year, he recommenced his payments, this time making regular deposits into their account.

"I received no correspondence, no communication, no telephone calls," Mr Collins said.

"Then I was served with a bankruptcy notice in August of 2017, which came as a complete surprise because I'd been paying the instalment amount," he said.

Mr Collins successfully challenged the bankruptcy in court, and has since paid off his debt which, with added interest and fees, came to nearly $13,000.

But the experience left him determined to break the "cone of silence" many others felt in the same position.

"I don't consider myself particularly vulnerable. I've earned good money," Mr Collins said.

"That must be a lot more difficult for other people and when you've got people like Lion Finance pursuing you and making your life a misery.

"It just makes everything so much harder to try and get your life back on the rails."

Lion Finance said it was confident in its procedures and practices in relation to the two cases featured in this story.

"It is a matter of public record that neither of these individuals were made bankrupt by Lion Finance," its statement read.

'Beg, borrow or steal'

Consumer finance groups want an urgent overhaul of Australian laws to lift the minimum amount for suing for bankruptcy from $5,000 to $50,000 to stop companies like Lion Finance using the courts to pursue vulnerable people.

"When you look at the amounts of credit people are given without even blinking, setting it at $5,000 is just ridiculously low," Ms Cox said.

She said part of the problem was credit being offered without proper checks to make sure a customer could afford the debt, particularly when retailers offered cards with interest-only periods.

"Quite often the limit on the credit card is thousands and thousands of dollars more than what you require to make the purchase," Ms Cox said.

"And then there are strong incentives and marketing sent out to encourage those people to take out the remaining limit.

"That's definitely part of the problem and bankruptcy shouldn't be part of the solution."

Northern Territory MP Jeff Collins at the Mindil Beach Night Markets. ( ABC News: Brendan Esposito )

Mr Collins said he thought a more reasonable threshold would be $20,000.

He also wants more funding for community legal services and an alternative means of mediation to deal with amounts between $5,000 and $20,000.

"The bankruptcy proceedings [are] intimidation," Mr Collins said.

"It's about trying to force you to go ahead and beg, borrow, steal to get that money to pay them upfront, rather than come to a reasonable agreement about an instalment plan."

In mid-July, after seeking help from Financial Rights Legal Centre and the ombudsman, Kim and Steven Forrest reached a deal with Lion Finance.

Lion Finance wanted the couple to pay $17,500 to settle the debt, but Ms Forrest asked for more information about the extra costs.

After that, Lion Finance agreed to settle for the original $11,500 amount ordered by the court.

The family borrowed the money from a peer-to-peer loan provider to clear their debt and last week the court matter was dropped.

But the family said they faced a new fight to clean up Mr Forrest's credit score.

Kim and Steven Forrest said their home was at the centre of their family. ( ABC News: Mary Lloyd )

"It just takes a toll on you, it takes a toll on your marriage, it's heartbreaking really," he said.

And while the spectre of bankruptcy no longer hangs over his head, Mr Forrest cannot spend as much time with his family as he'd like.

He will keep driving until the debt is paid.

"I wouldn't wish it on anyone. I thought I'd lost everything over $10,000. It's just stupid," Mr Forrest said.

"They're ruthless, I've never dealt with anyone like them and never again."