There are few things more intimidating than getting a court order or judgement in the mail. 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.
Though this can be intimidating, you still have plenty of options. In this guide, we’ll share 3 practical steps for dealing with a court order or judgement. As long as you take action, you’re on the path out from under this debt.
Settle Your Debt
First, settling your debt 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 installments. Rather than pay everything upfront, you can slowly pay your debt over time at an amount you can afford.
Another option is debt negotiation. This is when you pay a lump sum based on what you can afford to pay. This isn’t usually for the full amount, but it still clears the debt. Because creditors want to get as much money back as they can, many are open to this option.
However, if you choose a debt agreement or negotiation, make sure to get everything in writing. Specify that the debt will be cleared after you’ve met the agreed terms and conditions. If you own a home, mortgage refinancing may be another option to help free up some extra money to contribute to your debt. These options are all appropriate solutions for a court order or judgement.
Apply for an Instalment Order
Next, you can file what’s called an instalment order with the court. This allows you to repay your debt in instalments. Still, penalty interest will be added to your repayments, which will vary depending on your state.
To do this, you’ll need to file official court order forms in order to apply for an instalment order. As long as you can show that you can pay off your debts in a reasonable amount of time, this is a valid option as well.
Apply for Voluntary Bankruptcy
Voluntary bankruptcy is an extreme step, and it’s one that should only be taken if you have run through the alternatives fully. While this is an option, it’s highly dependent on your personal circumstances.
Declaring bankruptcy has serious financial ramifications, so we suggest talking to our debt consultants before making any decisions as there may be another solution that’s more suitable for you. Once you do this, you’ll be assigned a trustee who manages your debts. You’ll be protected from legal action from creditors, but it’s at a cost to your credit rating and assets.
What Action Can Creditors Take?
Now that you know your options, what about your creditors? What actions can your creditors take against you to reclaim the 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 so you’re prepared.
Request an instalment order
First, your creditors can ask the court to issue an instalment order. This is essentially a ruling on what you are obligated to pay. This is typically done after a hearing. They’ll gather information about your assets and income to determine what you can reasonably afford to pay.
The good news is these 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. As you see above, you can also apply for an instalment order.
Order an attachment of earnings
Also known as a garnishee order, with an attachment of earnings your creditors will be able to take money directly from your employer before your wages are paid in order to repay your debts. This can be scary, and you might not feel comfortable with your income being taken directly.
If this happens, you can apply for an instalment order. This will temporarily stop your creditor from taking any action on the attachment of earnings until the court hears your application. It’s important to act quickly to avoid this extreme option.
Obtain a warrant to sell your possessions
Next, this action will typically be carried out by a sheriff. When a creditor obtains a warrant, they’re legally allowed to seize and sell your personal possessions. What can they take? It can include your car, home, or any other items of value that are not considered basic household items.
However, you can refuse the sheriff entry to your home or request some additional time to negotiate with your creditor. Most sheriffs are happy to oblige, and they might be willing to work with you. You can still apply for an instalment order to halt any action to sell your possessions.
Commence proceedings to bankrupt you
Last but not least, creditors can also commence proceedings to bankrupt you involuntarily. While possible, they will most likely use this as a last option. Bankruptcy is time-consuming, and this doesn’t usually work in their best interest.
Remember, your lenders want to work with you. By working with you, it’s easier for them to earn back the money they’re owed. If you’re willing to negotiate with the lender directly, you can usually avoid bankruptcy proceedings.
Do You Always Need to Pay This Debt?
If you’re facing a court order or judgement, do you always need to pay back this debt? In fact, there are some instances where you aren’t required to pay your court order. For example, if you have no assets (other than normal household items), don’t own a home, or don’t own a car worth more than $8,150 (as of 28 July 2021), and have no income, lenders can’t pursue this debt
In addition, if your only income is a Centrelink payment and you have limited assets, 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. This is why it’s important to understand all of your options.
Take Action After a Court Order or Judgement
In conclusion, a court order or judgement debt can prevent you from securing credit at a reasonable rate or buying a home in the future. It can have a big effect on your financial outlook. It’s important to deal with it now.
As you can see from the list above, there are many positive steps you can take to deal with the situation. Most importantly, 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 now on 1300 368 322. We’ve helped many Australians navigate their way through a court order and we’re here to help you too. You’re never in this alone.