Your credit report (also known as credit file), and the related credit score (or rating), is a record of your history with managing credit and paying your bills on time. Banks and other potential credit providers use this information to determine how creditworthy you are, or the likelihood that you will pay back any money that they lend you when deciding whether to lend you more.
The lower your credit score, the higher the risk you appear to the potential credit provider. Information such as a lot of credit enquiries, missed payments, defaults, default judgements, court judgements, part IX (part 9) agreements, personal insolvency agreements and bankruptcy can all have a negative impact upon your credit score. They can make it difficult for you to get credit or you may have to pay a higher interest rate on any credit you do get, limiting the options available to you.
Today we are going to provide you an in depth understanding of judgements, how they impact you, and what you can do about them.
What is a judgement?
If you fall behind on your payments with creditors or individuals, they can apply for a court order (judgement) that requires you to pay your debt.
A judgement (also known as court judgement or spelled judgment, just to further confuse things) means that a Court or Tribunal has decided that a “judgement debtor” (the person who owes the money “the Defendant”) is required to pay the amount of money owed to the “judgement creditor” (the person who is owed the money “the Plaintiff”).
To obtain a judgement debt, a Creditor must apply to the relevant Court or Tribunal for an order to be made against the Debtor.
If you have a case at court over a debt that is not settled it will go to a trial. Both the Judgement Debtor (Defendant) and the Judgement Creditor (Plaintiff) get the opportunity to present evidence to the Court and can be examined (or asked questions) by the other parties. The court magistrate will then make a decision about the case. The judgement is the final decision of the court.
What happens once a judgement has been made?
The judgement debtor is usually given 28 days to pay the judgement debt. If the judgement is not paid within the time frame outlined, then the judgement creditor can apply to the court for orders to have the judgement enforced.
A court can pass different types of orders instructing the debtor to make payment to the creditor. Typically, a court would issue one of the three types of orders for debt repayment, as outlined below.
What is a means inquiry?
If you feel you’re not able to pay your debt under the judgement, you can ask the court for a Means Inquiry hearing. This usually involves you attending the court to answer questions about your income, expenses, assets and debts. This allows the court to get a full understanding of what is realistically achievable, and what options are best for everyone, in getting the debt settled.
Orders for payment can then be made if the court decides that the judgement debtor has the ability to pay the judgement. The three main options that can be taken to recover the money owed are:
1- Instalment Order
An Instalment order instructs you to pay the debt to the creditor in instalments. If you are facing financial difficulty, an instalment order can benefit you as repaying debt is usually easier when paid in manageable instalments. However, paying in instalments involves additional costs such as interest on the unpaid amounts and so can prove more costly in the long run.
2- Garnishee Order:
A court can pass a Garnishee order to force lump sum payments from the debtor to the creditor. For this purpose, a court can pass orders to authorities to recover money from your bank account or seize a percentage of your income or wages to settle your debt.
3 – Asset seizure and sale Order:
An asset seizure or asset sale order from court allows authorities to seize your asset(s), such as house, car, or any other valuable property and sell it. The proceeds realised from the sale are then used to pay back all, or some, of the outstanding debt.
How does a judgement impact my credit report and score?
In most cases in Australia, a court judgement will remain on your credit report for 5 years from the date of the court decision, even if you repay your debt, which can seriously hurt your credit score. We recommend that you do not apply for a new credit card or a mortgage if you have a judgement listed on your credit report.
Will the judgement be removed from my credit report once the debt is paid?
After paying the amount owed to your creditor in accordance with the court’s decision, the creditor is responsible for notifying the court that the debt has been paid in full. Subsequently, the court will notify the Credit Reporting Agencies, which would update your credit report and change the judgement status to “paid”. However, in most cases the judgement will remain on a credit report for five years from the date of the court decision.
Can I have a judgement removed from my credit report?
You can only have a judgement removed from your credit report before the five years is up if it was listed in error.
However, the experts at Fix Bad Credit have a comprehensive understanding of the legislation which permits a judgement being listed on your credit report. Our extensive experience has resulted in a 100% success rate in removing judgements from credit reports.
A court judgement can stay on your credit report for five years from the date of the court decision, which can discourage creditors from giving you loans. Fortunately, there are some options available to you if you have a court judgement against you. The options we discussed in the article can help you manage the process of dealing with a judgement on your credit report.
If you have a court judgement listed on your credit report, we strongly recommend that before you do anything, you contact the team at Fix Bad Credit to get a full understanding of your options.