By Jamieson Naylor, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group.
Becoming a judgment debtor, that is, having a judgment entered against you, can be quite an unsettling notion. However, judgment debtors should resist the urge to ignore a judgment creditor. There are a number of options open to a judgment debtor and it is important that judgment debtors should take steps to deal with a judgment debt as soon as possible. If a court or tribunal has entered judgment in favour of a judgment creditor, then the judgment creditor can enforce that judgment against a person known as a “judgment debtor”. The person with the benefit of the judgment is known as a “judgment creditor”.
If you are a judgment debtor it is important to understand the serious nature of a judgment debt and consider the impact it may have on you. If you are a judgment creditor it is useful to also understand the implications and effects your judgment will have on a judgment debtor.
From the date the judgment debt is entered against a judgment debtor, the judgment will appear on the judgment debtor’s credit report for a five year period. This may be extended by another two years if the debt against the judgment debtor becomes classified as a serious credit infringement. This can have an effect on the judgment debtor’s ability to obtain credit. Further, interest rates may be much higher and security requirements more onerous on a judgment debtor.
For both a judgment debtor and a judgment creditor, it is very important to note that the judgment debt can be enforced by the judgment creditor against the judgment debtor for a period of 12 years. This means that even if the judgment debt no longer appears on your credit report, the judgment creditor can take further enforcement action to recover the debt from the judgment debtor, until the limitation period applicable to the judgment debtor’s debt expires.
So if you are a judgment debtor what should you do?
Well normally, once a judgment debt has been entered, generally, a judgment debtor will have 28 days to pay the judgment debt to the judgment creditor. Accordingly, the first step is to assess a judgment debtor’s financial situation to work out if the judgment debtor will be able to pay the judgment amount in full, within this period, to the judgment creditor. If a judgment debtor can pay the debt to the judgment creditor within 28 days this can be highly beneficial as the judgment debtor will not have to pay any interest on the debt to the judgment creditor. The judgment debtor may also be able to negotiate with the judgment creditor to set the judgment aside which would remove the judgment debt from the judgment debtor’s credit report. Alternatively, the judgment debtor’s credit report can be updated to show that the judgment debt has been paid in full to the judgment creditor. It should be noted that if the judgment debtor is considering paying a judgment debt in full then it is likely that there may also be costs payable to the judgment creditor. If so, the judgment creditor is likely to insist that the judgment debtor pay these costs as a consequence of setting aside the judgment in favour of the judgment creditor.
If a judgment debtor cannot afford to pay the judgment debt in full within the 28 days to the judgment creditor, the judgment debtor can nevertheless request that the judgment creditor hold off on any enforcement action. The judgment debtor and judgment creditor may be able to try and reach an arrangement to pay the judgment debt in instalments. However even if an agreement between the judgment debtor and the judgment creditor cannot be reached, the judgment debtor can bring an application to the court to pay the judgment debt by instalments. The court will normally consider such an application without hearing from the judgment creditor, and based upon the financial position of the judgment debtor, and the proposed instalments to the judgment creditor. The judgment creditor can seek to set aside the court’s determination in respect of an application to pay by instalments granted in favour of a judgment debtor.
But what if a judgment debtor has not done any of the above?
If a judgment debtor does nothing the judgment may be enforced by a judgment creditor against the judgment debtor in a number of different ways, such as through a Garnishee Order, Writ for the Levy of Property or, in some circumstances, bankruptcy. Additionally, remember that the judgment creditor has 12 years to enforce the judgment against the judgment debtor, from the date judgment was entered. So a judgment creditor can afford to be patient. A judgment creditor may not necessarily enforce a judgment immediately. The enforcement of a judgment by a judgment creditor can be quite an unpleasant process for a judgment debtor and as a result the most important thing for a judgment debtor NOT to do, is nothing.
If you are a judgment debtor and are struggling with how best to resolve the judgment creditor’s judgment please contact our specialist team dedicated to Insolvency, Restructuring and Debt Recovery.
If you would like more information or advice in relation to Insolvency, Restructuring or Debt Recovery practice and procedure, please contact Stephen Mullette or Jeffrey Brown on (02) 9806 7459 or (02) 9806 7446, or email stephenm@matthewsfolbigg.com.au or jeffreyb@matthewsfolbigg.com.au
