By Eleanor Campbell-Rogers, Law Clerk at Matthews Folbigg in the Insolvency, Restructuring and Debt Recovery Group
Payment of a Judgment Debt
Debt recovery which ends up in an order of a Court or Tribunal requiring payment of a specific amount of money is a ‘judgment debt’. This type of debt recovery usually results from the Court/Tribunal accepting the creditor’s debt recovery attempts and awarding damages, costs, interest, repayment of a loan, restitution, lump sum child support, or a certified money order (amongst others).
Whether you are a debt recovery creditor awarded a judgment debt money by a Court or Tribunal, or a debtor ordered to pay it, dealing with a large debt recovery judgment quickly can be a daunting task fraught with complexity and uncertainty for both sides. Where a debtor is unable to pay the whole of the lump sum payment at once, the debt recovery efforts of the creditors will need to continue. But costly debt recovery enforcement proceedings can be impractical or unsuitable, especially where it may end with the judgment debtor bankrupt or liquidated, and the judgment creditor further out of pocket with little if any recourse for further debt recovery.
In many cases, payment of a judgment debt by instalments can be a more cost-effective and accessible debt recovery option. This is so for a judgment debtor, and debt recovery by instalments may also be better for the judgment creditor. A judgment debtor receives a stay on enforcement of the judgment debt (subject to the repayment conditions) and can pay a large debt off more easily. For the judgment creditor, receiving regular, modest payments for a well-crafted debt recovery instalment program can reduce headaches and increase certainty and effectiveness in recovering a large judgment debt. As they say, moving a mountain starts by carrying away small stones.
Debt recovery by instalments on a judgment debt occur in 4 ways:
- A formal or informal debt recovery arrangement between the parties (for instance a Deed which provides for the creditor to not undertake enforcement action subject to a debtor’s compliance with a suitable payment plan)
- Consent orders setting out the arrangement between the parties
- Filing a Notice of Motion to Pay by Instalments to the Court (in NSW, Form 46 in the UCPR Forms) – without consent of the judgment creditor, or
- Alternatively if a debt instalment arrangement is already in place, applying to the Court for a variation of the current orders.
Deed
A deed can be a simple way of effecting debt recovery. It is a legal document that records the terms of any payment arrangement, and can include a number of matters which will assist the creditor’s debt recovery whilst providing certainty for the debtor. Typically, this will include a stay of the debt recovery process and enforcement of any judgment debt provided payments are made in the terms agreed upon. Notably, a Deed of Compromise can be made regarding Judgment Debts after litigation has occurred.
Consent Orders
Consent orders are (as the name suggests) agreed orders which are made by a court between two litigating parties and which (once made) become legally binding on both parties. Debt Recovery by consent orders can include arrangements for payment of a judgment debt by instalments. Failure to comply with Court Orders (even by consent) can be very serious and may result in immediate legal action depending upon the orders. However, it may also be possible reach further agreement to vary consent orders, to avoid the consequences of non-compliance.
Notice of Motion to Pay by Instalments
Debt recovery may lead to a judgment debt. If there is no agreement, the debt recovery may continue to enforcement of the judgment debt unless the Court intervenes. Regulations 37.2 and 37.3 of the Uniform Civil Procedure Rules 2005 allow a judgment debtor to try and stop the debt recovery enforcement by application for an instalment order. This application occurs by filing a Notice of Motion to Pay by Instalments (in NSW UCPR Form 46 for individuals, Form 47 for companies). The application must be supported by an affidavit as to the judgment debtor’s financial circumstances. An instalment order may be made by the Registrar whether or not some other instalment order is in force in relation to the judgment debt, and importantly, the judgment debtor does not need the consent of the judgment creditor to make this application. The application is assessed independently by the Court (normally a registrar) and either accepted or rejected. If granted the debt recovery process is halted for the judgment creditor as enforcement judgment debt will normally be stayed. A judgment creditor may file an objection to an instalment order within 14 days of the order being made, and the Court will determine the application and may choose to uphold or rescind or vary the instalment order.
Variation of Consent Orders – by the Court
Where debt recovery has led to an instalment order by consent of the parties, this is not necessarily the end of the debt recovery road. A Court has general powers to grant extensions or abridgements of time, and to set aside its own orders, for instance in NSW pursuant to UCPR 1.12, 36.15 and 36.16. This debt recovery option may be useful for a judgment creditor where sufficient cause can show that the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. A judgment creditor may consider such an application if the information which formed the basis for consent orders was false or misleading. Alternatively, a judgment debtor may need to consider this step if the basis for the consent orders has changed. Whether the Court will vary the consent orders will depend on a number of factors and any such application should be considered carefully with proper legal advice.
If you are currently concerned with your debt recovery prospects of recovering a large debt (including a judgment debt) from a debtor in a fragile financial circumstance, or if are looking for an effective way to manage a judgment debt awarded against you, contact Matthews Folbigg Lawyers for specialised advice and guidance.
Matthews Folbigg Lawyers has a 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 law, contact a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
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