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Judgment Debt Instalment Orders

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By Emily Stubbs, Lawyer, MST Lawyers

Easing the financial impact of a judgment debt

Unfortunately anyone can find themselves in the situation of not being able to pay their debts resulting in creditors suing for the unpaid debt. A debt supported by a Court judgment can be daunting for the debtor, particularly if the debtor does not have immediate access to funds to enable full payment. Although the creditor has many options of enforcing the judgment debt, there are some options open to a debtor to control the method of enforcement.

Some judgment debtors are in a position to pay the debt by instalments over time and if that is the case they should approach the creditor and seek an agreement to that effect.  But if the creditor refuses to agree, an option for the debtor may be to seek an order permitting the debtor to pay off the judgment debt by instalments.

Under the Judgment Debt Recovery Act a debtor may make an application for an order to pay a judgment debt by instalments.

For a debtor, obtaining an instalment order may be very appealing compared to alternatives such as bankruptcy and the implications that flow from bankruptcy. However an application for an instalment order is not straightforward.

When a debtor files an application, he or she must make an affidavit outlining their financial position. This must be truthful and fully encompassing of every detail of their financial affairs including, but not limited to, income, liabilities, assets, dependents, and expenses. The affidavit should also attach as much supporting evidence as possible. This will help to avoid an application being rejected or later dismissed by the Court.

Further, the application needs to take into account ongoing interest that will accrue on the judgment and the proposed time frame for payment needs to be reasonable. What constitutes as reasonable will depend on a case-by-case basis. 

The Process

After the Court receives an application, a Registrar of the Court will make the decision to grant an instalment order or not. Once the parties receive notice of the decision, either party can object to the decision by filing an objection notice.

If there is no objection, then the instalment order takes effect. If there is an objection, then the matter then gets listed before the Court where the parties have an opportunity to argue their case. The Court can affirm, vary or dismiss the instalment order application. After the decision is handed down, the parties cannot make another application for a minimum period of three months.

Default

In the event of a debtor defaulting on an instalment order, the creditor has the ability to apply to the Court to set aside or vary the instalment order. This is particularly useful if the debtor defaults repeatedly and/or wilfully.

Provided the three month prohibition discussed above is not applicable, either party at any time can apply to have the instalment order altered. This is useful if the debtor has a positive or negative change in their financial affairs.

For further information on making or opposing an instalment order application please contact the Dispute Resolution and Litigation team by email litigation@mst.com.au  or by telephone on +613 8540 0200.