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Judgment debt options

Judgment debt options

Last updated: August 2019

What is a judgment debt?

If you owe money to someone (called a creditor), they can apply to the Magistrates’ Court for an order that the debt must be paid. Once a judgment has been made against you by a magistrate declaring that you owe an amount of money, interest will accrue at the penalty interest rate on top of the original debt.

Negotiating with the creditor

You can try to negotiate with the creditor to repay the judgment debt either by instalments or as a lump sum. If you have a lump sum of money that is less than the actual debt, you should try to negotiate with the creditor to accept the lump sum and waive the remainder of the debt. For example, if you owe $5,000 and you offer $3,000, this might be enough to finalise the debt. It is always worth trying to negotiate with the creditor in this situation.

Alternatively, you could offer to repay the debt in instalments. The amount that you offer to pay over a set period should be reasonable, in proportion to the amount of the debt and your financial circumstances, or the creditor is unlikely to agree. If you make an offer to repay the debt by instalments, you should try and come to an arrangement with the creditor that interest will cease to accrue during the repayment period.

It is important to record the terms of any negotiated agreement in writing (this is usually called a 'Deed of Settlement and Release') and, importantly, to obtain written acknowledgement from the creditor that they have no further claim against you once the debt, or an agreed lesser amount, has been repaid.

What are the most common methods of enforcing a judgment debt?

If a judgment has been entered against you and the debt remains unpaid, the creditor has the right to enforce payment of the debt. A judgment will only be enforced at the request of the creditor. Common forms of enforcement include:

  • summons for oral examination
  • instalment order
  • attachment of earnings order
  • attachment of debt order
  • warrant to seize property
  • bankruptcy proceedings.

What is a summons for oral examination?

A creditor may make an application for you to attend court for an oral examination. This is a hearing before a deputy registrar at the Magistrates’ Court to find out about your financial circumstances. At the hearing, the registrar will conduct the examination and ask questions which are contained in a questionnaire.

The creditor’s representative may also ask you questions about your financial circumstances. You will need to give sworn evidence about your assets, income, debts, expenses and any dependants. You should take any documents that will help you support your case, including bills and a budget outline. If you do not attend, a warrant may be issued for your arrest to compel your attendance at a further hearing.

Instalment orders

What is an instalment order?

Instalment orders can be made to allow you to pay off the debt by making smaller payments at regular intervals. Either the creditor or you can apply for an instalment order.

You cannot be forced to enter into an instalment order if your only income is received from Centrelink benefits. That is because Centrelink income is protected under legislation. However, your Centrelink income will no longer be protected if you voluntarily apply for an instalment order.

How can I apply for an instalment order?

You can apply for an instalment order by filling out a Form 61A supplied by the Magistrates’ Court, including the details of the debt and the payment instalments you would like to use to repay it. You must also fill out a Form 61B supplied by the Magistrates' Court – explaining your financial affairs – and submit copies of both completed forms to the Magistrates' Court and the creditor.

What is the benefit of entering into an instalment order?

If you enter into an instalment order, the creditor cannot take assets from you or enforce the judgment in any other way whilst it is in place and being complied with. An instalment order can be made providing for payment of the judgment alone, or both the judgment and penalty interest on the judgment.

Can I object to an instalment order?

You or the creditor can object to a decision of the registrar in relation to an instalment order within 14 days of getting notice of the order by filling out and submitting a Form 61D. You can also apply at any time to have the order cancelled or changed. The matter will be referred to a magistrate for review in open court.

What if I breach the instalment order?

If you agree to an instalment order, make sure that it is a payment plan you can afford. If you breach the order, the creditor can bring your matter back to court, and can ask for legal costs to be paid on top of the debt and the interest accumulating. If you fail to attend the further hearing scheduled at court a warrant for your arrest can be issued.

It is important that you stay in regular contact with the creditor so you can, for example, explain why you have missed an instalment or that your financial circumstances have changed. Keep a note of these conversations, recording the time and date, and who you spoke to. If the creditor refuses to negotiate reasonably and brings the matter to court arguing that you have been difficult to contact, you can show that you have been in contact with them, have explained your financial situation and have attempted to negotiate with them.

What is an attachment of earnings order?

An attachment of earnings order is a court order that allows for your employer to have money taken out of your wages and paid to your creditor until the debt has been paid off. A creditor who wishes to apply for an attachment of earnings order must send you a Form 72C, which you must complete. The Form 72C includes details of where you work, how much you earn weekly and whether the employment is ongoing.

A hearing will then take place (conducted by a registrar), and the court will decide how much (if any) should be taken out of your wages and paid to your creditor.

A maximum of 20 per cent of your pay (after tax) can be taken out under the order, unless the court determines otherwise. In determining the amount to be deducted, the court will consider all the information.

If you are on Centrelink benefits, this is protected income and a creditor cannot seek an attachment of earnings on this income. If you leave your job, or there are other changes in your financial circumstances, the court may cancel or change the order.

What is an attachment of debt order?

If a creditor knows that someone owes you money, they can apply to the court for an order that the person who owes you money must pay that money directly to the creditor. This will assist in wiping out, or at least in reducing your debt.

A hearing will take place (conducted by a registrar), and the court may decide that the person who owes you money should pay some or all of it to your creditor rather than to you.

Warrant to seize property

A warrant to seize property is an order of the court that allows the sheriff to seize certain items of your property, sell those goods and apply the net proceeds to reduce the amount you owe to the creditor.

Once a warrant is issued, the first step is for the sheriff to visit your home or business, produce the warrant and explain that if you don’t pay the amount owing, the goods will be seized and auctioned to pay off the debt. Generally the sheriff will allow you time to get the money, to negotiate with the creditor or to enter into an instalment order. You do not have to let the sheriff in, and the sheriff can only use force to enter your home if you unreasonably withhold your consent. They can enter through an open window or door.

After entering your home or business, the sheriff will identify the items to be taken. He or she cannot just take anything that will pay off the debt. You are allowed to keep the goods in your house that you need to live in basic comfort. These goods include (but are not limited to):

  • clothing
  • a washing machine and dryer
  • a refrigerator and freezer
  • a TV, VCR, radio and set of stereo equipment
  • a telephone
  • a lounge suite
  • a dining table and chairs
  • sufficient beds, bedding, linen, clothing, cutlery, crockery, heating/cooling equipment for the household
  • educational, sporting or recreational items (such as books and computers) used by children or students in the household
  • tools of trade to the value of $3,800 (current as at August 2019 – these figures are indexed annually)
  • a motor vehicle or motorcycle, which is used primarily as a means of transport, to the value of $8,000 (note that this amount refers to the equity in the vehicle, being the value of the car less amounts owing under finance) (current as at August 2019 – these figures are indexed annually).

Despite the specific exemption for certain household goods, antique items may still be seized by the sheriff. If you have any queries about what goods can and cannot be seized, contact a financial counsellor.

The sheriff cannot seize goods that do not belong solely to you. If the sheriff attempts to seize goods that are co-owned or subject to finance, you can tell that to the sheriff. The sheriff may still form a 'reasonable belief' that you own the property, but will give you a form for the third party to fill out. This may result in a court hearing to determine who owns the property.

As previously mentioned, the sheriff will also be unable to seize your goods if you are currently on an instalment plan. This works as a stay on the enforcement of the judgment debt.

The goods removed by the sheriff will be sold at auction or private sale and the proceeds given to the creditor. The sheriff will also be entitled to their costs in taking possession and selling the goods from this sale.

A warrant of seizure and sale allows the sheriff to sell your interest in land or a house (real estate) which you own (either alone or with another person). Real estate can only be taken if the warrant was issued by the County or Supreme courts. If the warrant was issued out of the Magistrates’ Court, it must be transferred to the Supreme Court before the real estate can be seized.


If you are unable to pay your debts and cannot come to a suitable repayment arrangement with your creditor, you may voluntarily lodge a petition to become bankrupt (called a debtor’s petition) or the creditor may take action to have you declared bankrupt by order of the Federal Court or Federal Circuit Court (called a sequestration order).

If you are declared bankrupt, the Bankruptcy Trustee has responsibility for dealing with all monies you owe and any assets you have. The trustee will determine if your money or assets can be used to pay your outstanding debts.

Bankruptcy normally lasts for three years and one day. The following consequences/restrictions apply while you are bankrupt:

  • your house and vehicle may be sold
  • if your income exceeds a certain limit, you may be required to pay a contribution from your income
  • you cannot manage a company unless you have permission from the court
  • you will not be allowed to travel overseas without the permission of the trustee
  • you will be recorded on the National Personal Insolvency Index forever
  • you will find it difficult to borrow money and buy things on credit.

You should get advice from a financial counsellor if you are considering bankruptcy.