Rebel as unsinkable said the best thing to do is negotiate a...

Rebel as unsinkable said the best thing to do is negotiate a monthly payment plan - for a 12k debt they will likely accept $250-$500 per month.

I've been in similar situations in the past and you just have to say 'look, I don't have the money, I'll do the right thing and pay you back, it's just going to take a while.'

Start out by offering $50/mth and just go up in $50 increments until they accept.

At on stage I had a $9k debt to Aussie Exchange (owned by Westpac) with whom I negotiated a $500/mth repayment.

I imagine MFG will be more sympathetic in your case as it was largely beyond your control.