So you’re dealing with a Victorian judgment debt and ordered to pay a sum of money within a short period, say between one and three months. The Court usually expresses this as a “stay of enforcement” or a “stay of execution”, meaning a suspension of the orders made. The problem is you don’t have that kind of money and borrowing the entire amount is not an option at this point. Here, the Judgment Debt Recovery Act 1984 (Vic) (‘the Act’) may assist you.

Your first point of call is to initiate discussions with the judgment creditor (the person/company who you pay money) in regards to agreeing upon a payment plan. If you and the judgment creditor reach an agreement, you may jointly elect to file an Instalment Agreement with the court under section 7 of the Act. The Instalment Agreement then becomes an order of the court known as an Instalment Order.

If you and the judgment creditor cannot reach an agreement as to a suitable payment plan, you should consider applying to the court for an Instalment Order under section 6 of the Act. The judgment creditor will receive an opportunity to object to the making of an Instalment Order, and it will then become a matter for the court to determine.

An Instalment Order once made has the effect of preventing any enforcement of the judgment debt. But note that if you do not comply with it or if your financial circumstances change such that you could potentially pay out the debt sooner than required, the judgment creditor may apply for a variation of the Instalment Order under section 8 of the Act. Likewise, if your financial circumstances deteriorate (or vastly improve), you may apply to vary the Instalment Order as is suitable to you.

The Interaction Between Instalment Orders and The Bankruptcy Process

An Instalment Order can allow you to pay your judgment debt in a way that enables you to avoid applying for bankruptcy. However, a judgment creditor may still wish to commence the bankruptcy process against you by filing and serving a bankruptcy notice when the stay ordered by the court has expired. You can only invoke the bankruptcy process if there is a genuine reason to believe that you ought to be declared bankrupt for the protection of the public.

Accordingly, before the stay expires, you need to either:

  • Apply for an Instalment Order and serve the application on the judgment creditor; or
  • Obtain an Instalment Order to ensure that a bankruptcy notice cannot be issued against you (or if it is issued that it will be ineffective).

Key Takeaways

If an Instalment Order is made after the service of a bankruptcy notice, it will not prevent the notice from being effective and can then be used as a basis upon which you may be bankrupted.

However, if it can be shown that the judgment creditor is using the court’s bankruptcy jurisdiction as a forum for debt recovery, a bankruptcy notice may be set aside as an abuse of process.

If you have any questions or need advice on avoiding bankruptcy when dealing with a Victorian Judgment Debt, contact our specialist debt recovery lawyers on 1300 544 755.

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