A person or a company who is a party to court proceedings, may become a judgment debtor in two ways:
- A court can order judgment against a debtor after a final hearing of debt recovery proceedings; or
- A court can enter a default judgment against a debtor in circumstances where they fail to file a defence in time after being served with a statement of claim.
Either way, a judgment debtor must consider and decide on what steps they will take next.
Further Consideration After Default Judgment
If a debtor has had default judgment entered against them and they do not believe that the debt (in part or in whole) is owing, they may take steps to have that default judgment set aside. If you wish to learn more about having default judgment set aside in New South Wales, see our article, setting aside default judgment in NSW.
The remainder of this article looks at some options available to a judgment debtor who does not dispute that the debt is owed, or where the court has entered judgment after a final hearing.
Option 1: Pay the Amount Owed
If you can pay the debt, you should do so immediately. Delaying payment will likely result in the judgment creditor taking steps to enforce the judgment. The judgment debtor will then also be liable to pay the judgment creditors costs associated with that enforcement action.
Option 2: Do Nothing
It’s never the best option to bury your head in the sand. However, if you choose to do nothing either because you simply do not have the means to pay the judgment debt, or for any other reason, you should be aware that the judgment creditor will likely take steps against you to enforce the judgment. Enforcement options available to a judgment creditor can include having your property seized, having your wages or money held in a bank account garnished, being made bankrupt, or where the judgment debtor is a company, having that company wound up.
Option 3: Negotiate With the Judgment Creditor
Just because judgment has been entered, doesn’t mean that you can’t try and negotiate with the judgment creditor about payment options. Whether or not the judgment creditor will be open to negotiations will largely depend on the circumstances surrounding why judgment was entered in the first place.
There is no limit to what parties can negotiate. Common types of negotiations include:
- Paying a lump sum at an agreed date in the future;
- Paying an amount less than the judgment debt as a lump sum immediately;
- Making large instalment payments on agreed dates;
- Making smaller instalment payments over a longer period; or
- Paying the principal debt without any added interest.
If you successfully negotiate a payment plan (particularly if the amount that you have negotiated to pay is less than the judgment amount), it is prudent that you reduce the agreement to writing, and both parties sign the document. This is commonly known as a Deed of Settlement and Release and protects the judgment debtor from any future claims being made against them for the balance of the judgment amount. Any agreement parties make between themselves should be specific, and include instalment amounts, dates and how a party will make payment (e.g. direct debit).
Option 4: Application to Pay by Instalments
If you have been unsuccessful negotiating with the judgment creditor and you do not have the ability to pay the entire judgment amount immediately, you can make an application to the court to pay the judgment amount by instalments.
It is at the court’s discretion as to whether your application will succeed or not. In making its decision, the court will consider your financial circumstances including:
- Your income, including wages, Centrelink payments, rental income, profits (if the judgment debtor is a company), etc.;
- Your assets including money held in bank accounts, your home, cars, investment properties, boats and caravans, etc.; and
- Your expenses, including rent or mortgage payments, household expenses, child care costs, etc.
The court will also consider the following:
- What instalments you are offering to pay;
- Whether you can afford to make those payments or whether you can afford to pay more than the amount offered; and
- Whether the judgment debt will be paid off within a reasonable time.
Even though judgment may have been entered against you, there are still options available as to how you pay the judgment debt. Don’t put your head in the sand! Be informed and make the right choice for you or your company while you still can. If you have any questions, get in touch with our disputes team on 1300 544 755.