What to do if there is a court Judgement against you for Debt

First of all, you cannot be sent to jail for not paying a debt.

The laws vary among each Australian state and territory for court judgments. This information applies to local and magistrates courts. If you are getting court notices or demands ring Money Buckets immediately - 1800 825 010

Check whether there is an actual court judgment against you and not just a threat. Normally you should receive a legal letter giving notice of the Court Case. You can appear or contact the court to fill in a Hardship request and request a payment plan. If you find this too stressful, Money Buckets can try and negotiate directly with the creditor to organise a payment plan before it goes to court, so contact us immediately you receive a Letter or notification.

A creditor may tell you they have a court judgment but if you don’t have a formal court letter 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 it is.

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.

If you do owe the money MoneyBuckets can include Court Judgments into Part IX Debt Agreements and Bankruptcies or negotiate a repayment Plan on your behalf. This will resolve the court Judgment into a Debt Solution.

If you do nothing a Creditor can:

• Obtain 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. 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.
• Obtaining a court order allowing the creditor to take money from your wages or bank account. This is where they may take a large portion of your pay direct from your wage or bank accounts. This is called a Garnishee and can be crippling to your families finances. leaving you very little to live off whilst the debt is paid off.  This will include any holiday pay if you resign. An employer must comply with this order or face severe penalties.
• 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 $5000

If this is the case, your still have the option, at this stage, to put this Debt into a Part IX Debt Agreement and propose a payment plan that includes all your creditors. If the majority of creditors vote in favour of your Debt Agreement (over 50% of the Debt value), then the Creditor who has the court judgement against you has no choice but to accept the plan.  They will receive payment as part of your Debt Agreement from payments you make.  

You also have the choice to Declare Bankrupt, which will stop the Garnishee.

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 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.