Facing a court order can be scary, but it’s important to remember that most creditors are willing to work with you to clear your debts.
If you’ve received an order, it means your creditor has taken you to court (either you went to court and lost or you ignored the summons). The court order or judgement debt, is simply an order issued by the court that legally requires you to pay your creditor. They have up to 12 years to collect the debt, and you’ll likely need to pay for their legal costs as well.
While it can be tempting to ignore this just as you may have done with overdue bills before, a court order can have some pretty serious consequences if left undealt with. But don’t fret, you still have plenty of options.
Here’s a rundown of what you can do if you’ve received a court order/judgement debt:
Settle your debt
This is perhaps the most straightforward way to deal with your court order. You can enter into a debt agreement or an informal payment arrangement with your creditor, both of which will allow you to make payments in instalments, rather than pay everything up front. Another option is debt negotiation which offers a lump sum payment of what you can afford to pay (doesn’t have to be for the entire amount) to clear the debt. Make sure to get everything in writing, and specify the fact that the debt will be cleared after you’ve met the agreed terms & conditions. If you own a home, mortgage refinancing may be another option to help free up some extra money to contribute to your debt.
Apply for an instalment order
You can file what’s called an instalment order with the court, which will allow you to repay your debt in instalments. Penalty interest will be added to your repayments, which will vary depending on your state. You’ll need to file official court order forms in order to apply for an instalment order and be able to show that you can pay off your debts in a reasonable amount of time.
Apply for voluntary bankruptcy
While this is an option, it’s highly dependent on your personal circumstances. Declaring bankruptcy has serious financial ramifications, so we suggest talking to a debt consultant before making any decisions as there may be another solution that’s more suitable for you.
What your creditors can do with a court order/judgement debt
Your creditors can take a number of actions once they’ve secured a court order. Here’s a quick overview of what they’re allowed to do:
Request an Instalment order
Your creditors can ask the court to issue an instalment order, which is essentially a ruling on what you are obligated to pay. This is typically done after a hearing where they’ll gather information about your assets and income to determine what you can reasonably afford to pay. The payments are usually smaller and spread out over a longer period of time. If you’ve made your payments consistently on your instalment order, your creditor can’t take any further action on you.
Order an attachment of earnings
Also known as a garnishee order, with this your creditors will able to take money directly from your employer before your pay cheque is issued in order to repay your debts.
If this happens, you can apply for an instalment order, which will temporarily stop your creditor from taking any action on the attachment of earnings until the court hears your application.
Obtain a warrant to seize & sell your possessions
This will typically be carried out by a sheriff and can include your car, home or any other items of value that are not considered basic household items. You can refuse the sheriff entry to your home or request some additional time to negotiate with your creditor, which most sheriffs are happy to oblige. You can still apply for an instalment order at this point in time to halt any action to sell your possessions.
Commence proceedings to bankrupt you
While possible, they will most likely use this as a last option. Remember, it’s in their best interest to work with you, so if you’re willing to negotiate you can usually avoid bankruptcy proceedings.
Are there instances where you don’t have to pay?
Yes, there are some instances where you aren’t required to pay your court order. If you have no assets (other than normal household items), don’t own a home, or car worth more than $7,800 and your only income is a Centrelink payment, you will be considered ‘judgement proof’ under the law. If this is the case, you may even be able to have the debt waived by the creditor.
Take positive action
A court order/judgement debt can prevent you from securing credit at a reasonable rate or buying a home in the future, so it’s important to deal with it now. There are many positive steps you can take to deal with the situation, and there’s no shame in seeking professional help. Many people have been in your situation before and there’s plenty of viable options such as informal payment arrangements, debt agreements and bankruptcy assistance to help you deal with your court order.
If you’re facing a court order and need some expert advice, give us a call on 1300 368 322. We’ve helped many Australians navigate their way through a court order and we’re here to help you too.