If you take no action or do not reach a satisfactory agreement and have not filed a defence within 21 days after you receive the claim, the creditor can automatically get judgment entered on the debt without you being involved or knowing that it has happened. This is called default judgment because you have not answered the claim with a defence.
Judgment can also be obtained if you file a defence, but do not go to Court for the directions hearing or trial, or if you lose your case (your defence is unsucessful).
The Court enters judgment on your debt which means that you legally owe the money. You will not be notified that this has happened. The creditor can now take other action through the court to recover the debt.
What can the creditor do now?
The creditor can now take enforcement action. They can:
The creditor can also go to the Federal Court to have a notice issued to make you bankrupt. This is unlikely if you do not have assets such as equity in a house.
All of these actions can have a huge impact on you and your family, particularly if you have assets. Get legal or financial counselling advice as soon as possible so that you know what your options and rights are.
Most often the first enforcement action the creditor takes in the Magistrates Court will be to ask the court to issues a summons to the debtor to appear at an Investigation Hearing. If the judgment is for less than $10,000 and does not arise out of the carrying on of business, this is the first enforcement process that the creditor is allowed to take, unless they make an application.
The purpose of the investigation hearing will be to determine whether you can pay the debt and if so, how you will pay it. It is not a chance to deny that you owe the debt.
Some people may find the court process confusing and stressful. There are several important things for you to know before going to court. The process and your options are discussed in more detail below see Investigation Summons.
The rest of this section talks about other enforcement steps that can be take against you to recover a judgment debt.
Take your goods – Warrant of Sale
The court has the power to authorise the seizure and sale of your property (real estate and personal property). This means a sheriff will come to your house to make a list of things that could be taken and sold to pay your debt. They cannot take items that would be protected in bankruptcy such as household goods and furniture, personal things, a car (valued under a certain amount ) and tools of your trade (under a certain amount). (Note: If you have a car or tools of trade worth more than the protected amount, the sheriff could take the item/s and apply the whole amount of the sale proceeds including the protected amount to the debt.)
After all of the creditor’s and court costs and interest are taken out of sale proceeds, any remaining amount will be given to you.
The creditor can have a warrant of sale issued against your house if there is available equity (that is any money you owe on a mortgage is less than the value of the house). Usually a creditor will have to go before a Magistrate to ask for a Warrant of Sale to be issued, especially if they have not tried an investigation summons first. In any case you can apply to the court to seek an instalment order instead of the original seizure or sale of assets. Contact the Court Registry for advice on how to do this.
A legal "charge" is placed on some item of your property, typically land or property. It does not mean that a creditor will obtain their money immediately, but they will retain a legal "charge" over your assets which give the creditor a legal claim over some or all of the proceeds of the sale of those assets when you sell them.
Force you to become bankrupt
If your debt is over $5,000 a creditor can start a process of applying to the Federal Court to have you declared bankrupt. The creditor is unlikely to do this if you do not have assets such as a house or car as they will have to pay an initial fee. You may choose to become bankrupt voluntarily (see 'Paying a debt' and Bankruptcy ).