Court judgments

If you’ve been taken to court by a creditor who says you owe money, you may end up with a court judgment against you. A court judgment is a decision by the court that you owe the money.

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WHAT TO DO IF THERE’S A COURT JUDGMENT AGAINST YOU FOR A DEBT

A court judgment means the court has decided you owe the debt to the ‘judgment creditor’. Depending on where you live, the court might be called either the local court or the magistrates’ court.

The laws in each state and territory about the debt vary.

If the court has decided you owe the debt, then the judgment creditor has at least 12 years (or 15 years in South Australia and Victoria) to take further action to recover the debt from you.

If you’re getting court notices or demands about a debt you owe, get legal advice immediately. You can get free and independent legal advice from consumer credit community legal services.  To find your nearest service, check our page on Legal Advice.

01

Check whether there is a court judgment

A creditor may tell you they have a court judgment. You should check this for yourself by calling the local or magistrates’ court and asking the following:

  1. The amount of the judgment
  2. The date the judgment was obtained
  3. The name of the judgment creditor (who took the legal action and got the judgment)

What amounts can the creditor add on to a court judgment?

A creditor with a court judgment can add the following costs to the judgment debt:

  • Interest. This will be either at the rate under the previous contract or at the rate set by the court.
  • Legal costs in getting the court judgment. This amount may be limited by the court.
  • Enforcement costs. These are the costs the creditor incurs in getting you to pay the debt.

02

Do you have a reason why you may not owe all or part of the debt?

If you believe you have a reason or argument why you do not owe any, or part, of the debt, you need to get legal advice. What you do next will depend on the type of court judgment.

There are two types of court judgment:

  1. Where you lodged a defence and the court decided the matter (a judgment) A defence means you argued there’s a reason you do not owe all or part of the debt; or
  2. You did not lodge a defence and the court decided the matter without you (a default judgment).

If you have a judgment against you, the only option available through the courts to change that decision is to appeal it. That means you must lodge an appeal with a higher court for the decision to be reviewed. There are short time limits to lodge an appeal (usually 28 days) and you need to get legal advice urgently if this applies to you.

If you have a default judgment you may be able to apply to have the judgment set aside if you have an arguable defence (a reason you do not owe all or part of the debt). If the court believes you have an arguable defence, it may set aside the original decision and hear the matter. You need to get legal advice if you believe you have a defence.

03

Your options when you have a judgment debt

When your creditor has a judgment debt against you, your options are:

  1. Pay the debt (see box below). You can negotiate to pay the debt directly with the creditor. Unless you’re paying the debt in full, the other options will need to be negotiated with the creditor, who can say no. Some options are:
    • Pay the debt in full
    • Offer to pay a reduced amount to settle the debt
    • Make a repayment arrangement
  2. Apply to the court to repay the debt in installments. You need to complete specific court forms and the repayment arrangement needs to be affordable and of an amount that will repay the debt in a reasonable time. The court decides whether the installments offered are reasonable.
  3. Voluntary bankruptcy. Bankruptcy is a serious decision. Call us on 1800 007 007 and see our page about it before declaring bankruptcy.
  • Consider trying to make a repayment arrangement with the creditor directly (as the creditor may agree to an arrangement you can’t get in court). Only agree to repayment arrangements you can afford.
  • If you can make repayments, start making them while you negotiate. This demonstrates what you can afford and shows you want to repay the debt.
  • If you make an agreed repayment arrangement with the creditor, get the arrangement confirmed in writing. Keep details of the repayments you make (for example, bank records).
  • If you’re late with a payment on a repayment arrangement or an installment order, call the creditor immediately and explain why. Try to make an arrangement to catch up. If you can’t make an arrangement, call us.

04

What can a creditor do to make you pay the judgment debt?

Your creditor can take action to recover their money by doing any of the following:

  1. Obtaining an order from the court that compels you to provide information about your financial position by post or in person at the court (called an oral examination).
  2. Requesting that the court order a repayment arrangement.
  3. Obtaining a court order allowing the creditor to take and sell your personal property that’s otherwise not protected in bankruptcy.
  4. Obtaining a court order allowing the creditor to take money from your wages or bank account (called a “garnishee”).
  5. Obtaining a court order allowing the creditor to sell or “charge” real property (for example, your home).
  6. Commencing legal proceedings to make you bankrupt if the debt (including costs and interest) is over the $10,000 bankruptcy threshold for a creditor’s petition.
  • The rules and procedures vary, so get legal advice if your creditor is taking action.
  • An order that allows a creditor to take money from your wages or bank account can cause financial hardship, so act quickly to get advice about how you can avoid this. An installment order obtained through the courts may reduce the amount taken.
  • There are rules about how and what personal property can be taken and sold. You are usually given time to make an arrangement to pay before personal property is taken.

05

Court judgments and your credit report

Court judgments will be listed on your credit report. Court judgments may make it difficult for you to get credit or you may have to pay a higher interest rate on any credit you get.

The court judgment will remain on your credit report for five years from the date of the judgment. A judgment creditor has at least 12 years (or 15 years in South Australia and Victoria) to take further action to recover the debt from you. So just because a court judgment no longer appears on your credit report, it doesn’t mean the debt is no longer owing.

06

When you may not have to pay a judgment debt

If you don’t have any assets other than household items, don’t own any real property (for example, a home or block of land), your car is worth under $8,150 and your only income is a Centrelink payment, you may be protected from having to pay the judgment debt or the judgment debt may be difficult to enforce. Call us to get advice if this situation applies to you.

When your only income is Centrelink

If Centrelink payments are your only income, you’re protected from any of your fortnightly payments being taken from Centrelink. But it might be possible for accumulated savings from Centrelink payments to be taken from your bank account if a court order is obtained.

Victoria’s Judgment Debt Recovery Act 

In Victoria, section 12 of the Judgment Debt Recovery Act provides that an installment order will not be made if your income is only Centrelink. This means in effect that a debtor cannot be forced to pay a judgment debt if their sole source of income is Centrelink and they have no significant assets.

07

Speak to one of our financial counsellors

While our free financial counsellors can’t give you legal advice, they can refer you to a legal service that can. They can also help you work out what you can repay and assess your overall financial position.

Financial counsellors aren’t judgemental about your circumstances – they’re here to offer you free, confidential and independent advice and assistance.

To speak to a financial counsellor you can:

  • Call the National Debt Helpline on 1800 007 007– open Weekdays from 9:30 am to 4:30 pm.
  • Use our live chat service by clicking the chat icon in the bottom right corner of your screen. Live chat is available 9:00 am to 8.00 pm weekdays. If you send a message outside these hours a financial counsellor will get back to you.
  • Make an appointment to see a financial counsellor in your local area – Find a local Financial Counsellor.
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You might feel overwhelmed, but you have options and there are steps you can take yourself. But if you feel you need a bit more guidance or need help quickly, simply call us.

CALL 1800 007 007