Definition of a Judgement Debt
If you (“the debtor”) owe a person or a company (“the creditor”) money and fail to repay that money by the agreed due date, the creditor can apply for a court or tribunal order demanding that you repay your debt. An order made by the court or a tribunal is called a judgement debt.
Before understanding the consequences of judgement debt in detail, you need to understand the exact meaning of court judgement.
Definition of a Court Judgement
A court judgement is a legal order that makes a person or organization liable for the amount of money. If you owe an amount of money to another person, they have the option to commence legal proceedings in an attempt to recover the amount outstanding.
Definition of a Statement of Claim
This process would normally involve the services of a solicitor who would begin the process by preparing a “statement of claim”, and which is best explained, as follows:
>> In these proceedings, the party that is commencing the legal action is known as the plaintiff or claimant (“the creditor”) and the party being sued is known as the defendant (“the debtor”)
>> A statement of claim will outline the claim and what the defendant may do to resolve the matter
>> Typically, a Statement of Claim will give a 28 day period for the defendant to either file a defence or settle the matter with the plaintiff
Do the Legal Proceedings vary between each Sate and Territory?
Yes, the process does vary slightly between each Sate and Territory, but for the most part the fundamentals are the same.
The one thing that does differ is the process of the defendant being served a statement of claim. In the state of NSW, this does involve the defendant being personally served while in other states the plaintiff only needs to mail the document.
Is a Court Action recorded in my Credit File?
Yes, a court action is recorded on your credit file for five years. However, the limitations period under the Act is twelve years. It is also worth mentioning that the credit reporting agencies gain this information from the public records that the courts produce and not from the plaintiff or solicitor.
What is the Effect of a Judgement Debt on my Credit Score?
All adverse public records, which include judgements, tax liens and bankruptcies, are considered when calculating your credit score. It is important to note that:
>> The dollar amount of a judgement makes no difference and the mere presence of a judgement can cause your credit score to drop up to 150 points when they are first reported.
>> There is no exact formula to determine how much your credit score will drop, as each credit reporting agency is different and each individual credit report is different.
>> Once a creditor gets a judgement, they can attach bank account, garnish wages, and file liens on any other property you may own, including your home, land, cars and boats.
>> Judgements will stay on your credit report from the date it was filed, whether you pay it or not. The time frame that it will remain depends on the statute of limitations in your state or territory.
>> Judgements impact your credit score the most during the first two years they are reported.
>> Judgements will gradually diminish over time until they fall off after the statute of limitations runs out.
>> Judgements on your credit report make it very hard for you to get any other types of loans without incurring:
1. massive down payments
2. huge fess, and
3. maximum interest rates
>> The payment history is 35% of your overall credit score (judgements will fall into the important category of payment history)
Can Judgement Debts be removed from a Credit Report?
The short answer is yes. In most cases, a court judgement can be removed from a credit file. As you can imagine, there are a number of steps to the process of removing judgement debts from a credit report. However, it does take time (from dealing with the plaintiff to having the documents filed and stamped to the actual deletion of the listing). It can take up to eight weeks to achieve this goal and longer if the plaintiff does not initially cooperate.
The process of removing a court judgement from a credit file begins with having the creditor (plaintiff) agreeing to:
>> Signing a Notice of Discontinuance or Consent Order depending on the state the judgement was entered in.
>> By signing this document, the plaintiff is agreeing to formally discontinue their action, not an unreasonable request if the judgement is paid or the defendant can settle the debt. However, this can be a very different matter if this is not the case.
>> If the judgement is unpaid, there is very little chance the plaintiff will agree to discontinue their action.
>> It can be beneficial if you have not paid the judgement but are in a position to settle with the plaintiff at the time you approach them. Nothing motivates a plaintiff more than the prospect of getting paid.
>> In most cases even if the judgement has been paid prior, the plaintiff will agree to sign the necessary documents, given they are approached in the right way of course.
>> Once the court has filed and stamped the necessary documents, it is a matter of providing the stamped order to the credit reporting agencies.
>> With the information in hand, in most cases they will delete the listing from the defendant’s credit file.
Is there a Simpler Way to remove the Judgement Debt from my Credit File and obtain finance?
If you are unable to secure finance, because of a court action listed in your credit file, all is not lost! With the right skills and knowledge of a finance broker, these listings can be permanently removed from a credit file.
Contact a reputed finance brokerage firm that employs experienced finance brokers. Choose a finance broker who has thorough knowledge of court judgements and legal procedures. He/she will be able to guide you through your options in removing court judgement and improving your credit score. He/she will provide you with suggestions to overcome any unfavourable situation.