What To Do If There Is A Court Judgement Against You For Debt
A court judgment means that 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 are 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.
01 Check whether there is a court judgment
A creditor may tell you they have a court judgment. However, you should check this for yourself by calling the local or magistrates 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 judgement)
What amounts can the creditor add on to a court judgment?
A creditor with a court judgement 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:
- Where you lodged a defence and the court decided the matter (a judgment) A defence means that you argued there is a reason you do not owe all or part of the debt; 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 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 court judgment debt
When your creditor has a judgment debt against you, your options are:
Pay the debt (see box below). 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.
04 What can a creditor do to make you pay the court 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 in person at the court (called an oral examination).
- Requesting that the court order a repayment arrangement.
- Obtaining a court order allowing the creditor to take and sell your personal property that is otherwise not protected in bankruptcy.
- Obtaining a court order allowing the creditor to take money from your wages or bank account (called a “garnishee”).
- 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 the $10,000 bankruptcy threshold for a creditor’s petition.
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 5 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 does not mean the debt is no longer owing.
06 When you may not have to pay a court 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 $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.
Source: National Debt Helpline
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