WHAT TO DO IF THERE IS A COURT JUDGMENT AGAINST YOU FOR A DEBT
The laws vary among each state and territory for court judgments. This information applies to local and magistrates courts. If you are getting court notices or demands get legal advice immediately. You cannot be sent to jail for not paying a debt.
Check whether there is a court judgment
A creditor may tell you they have a court judgment but you should check by calling the court and asking the following:
- The amount of the judgment
- The date the judgment was obtained
- 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?
The creditor who has 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.
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. How you move forward will depend on the type of court judgment.
There are two types of court judgment:
- Where you lodged a defence and the court decided the matter (a judgment); or
- 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 lodge an appeal with a higher court for that 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 set aside the judgment 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.
Your options when you have a judgment debt
When your creditor has a judgment debt against you, your options are:
- Pay the debt. You can negotiate to pay the debt directly with the creditor. Unless you are 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
- Apply to the court to repay the debt in instalments. 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 instalments offered are reasonable.
- Voluntary bankruptcy. Bankruptcy is a serious decision. Call us on 1800 007 007 before you consider declaring bankruptcy. See bankruptcy.
- Consider trying to make a repayment arrangement with the creditor directly (as the creditor may agree to an arrangement you cannot 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 are late with a payment on a repayment arrangement or an instalment order, call the creditorimmediately and explain. Try to make an arrangement to catch up. If you cannot make an arrangement call us.
What can the creditor do to make you pay the judgment debt?
Your creditor can take action to recover their money by doing any of the following:
- Obtaining an order from the court that compels you to provide information about your financial position by post or at court.
- Requesting that the court order a repayment arrangement.
- Obtaining a court order allowing the creditor to take and sell your personal property
- Obtaining a court order allowing the creditor to take money from your wages or bank account.
- Obtaining a court order allowing the creditor to sell or “charge” real property (for example, your home).
- Commencing legal proceedings to make you bankrupt if the debt (including costs and interest) is over $10,000
- 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 instalment order obtained through the courts may reduce the amount taken.
- There are rules about how and when personal property can be taken and sold. You are usually given time to make an arrangement to pay before personal property is taken.
Court judgments and your credit report
Court judgments will be listed on your credit report. The court judgment will remain on your credit report for 5 years from the date of the judgment. 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.
When you may not have to pay a judgment debt
If you do not have any assets other than household items, do not own any real property (for example, a home or block of land), your car is worth under $7800 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 are protected from any of your fortnightly payments being taken from Centrelink. However, it may be possible for accumulated savings from Centrelink payments to be taken from your account if a court order is obtained.
Judgment Debt Recovery Act Vic
In Victoria, section 12 of the Judgment Debt Recovery Act provides that an instalment 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.
If your problem still hasn’t been solved or you are just too overwhelmed to tackle your debts, call us on 1800 007 007 to speak to one of our financial counsellors.