DEBT RECOVERY IN THE LOCAL COURT
This fact sheet is for information only. It is recommended that you
get legal advice about your situation.
CASE STUDY
FACT SHEET
Nick had been having trouble paying his credit card debt. At
first, the bank was ringing him all the time but then he heard
nothing for a while and thought the debt had been written off.
A year after he had stopped paying Nick was contacted by a
debt collector. The debt collector said he had to pay the whole
debt within the next week or he would be taken to court. The
debt collector told Nick that they could take his car, his stereo
or anything else of value. Nick is now too scared to open the
door in case someone will come in and take his things!
If you are being threatened with court action over a debt it is useful
to know what happens and if you can do something to stop court
action.
REMEMBER:YOU CANNOT BE SENT TO JAIL FOR NOT PAYING A
DEBT!
CALL THE
CREDIT & DEBT
HOTLINE ON
1800 007 007
If you owe money to someone they may take you to court to recover
their money. This is usually referred to as legal action or court
action. The information below refers to debt recovery in the Local
Court in NSW only.
WHEN CAN COURT ACTION BE COMMENCED AGAINST ME?
Financial Rights Legal Centre Inc.
ABN 40 506 635 273
Fact sheets are information
only and should not be relied
upon as legal advice. This
information only applies to
NSW.
©2014 Financial Rights
All rights reserved.
As a general rule, court action can be commenced against you as
soon as you have failed to make a repayment or pay a debt by the
due date. One major exception to this rule relates to loans for
personal purposes. For these loans, a default notice must be sent to
you giving you 30 days to fix the default.
In practice, the person or company claiming that you owe them
money (the plaintiff) will usually send reminder notices and a final
letter of demand before commencing court action.
HOW DO I KNOW WHEN COURT ACTION HAS
COMMENCED?
You will know when court action has commenced against you as
you will receive a “Statement of Claim” (also called a Summons). A
Statement of Claim is usually sent by ordinary post. This means that
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if you have moved address, the plaintiff may use your last known address
and you may not receive the Statement of Claim.
You can check that it has been issued by the court because it will have:
●●
The name of the relevant court and a court stamp
●●
A court number
●●
A brief description of what will happen if you do not respond
within a certain time.
If you are unsure whether the document has been issued by the court you
should ring the court registry and check.
FACT SHEET
WHAT DO I DO NEXT?
If you have received a Statement of Claim you usually only have 28 days
to respond. The Statement of Claim will also tell you how long you have
to respond. You have 28 days to respond from the date your received
the Statement of Claim. After 28 days the plaintiff can apply for
judgment.
NOTE:The Plaintiff may apply for judgment as soon as the 28 days has
finished or may take longer. If you are unsure whether the lender has a
judgment ring the Court.
A Statement of Claim is an important document. Do not ignore it. Get
legal advice immediately. See Factsheet: Getting Help for details.
You have 4 options once you have received a Statement of Claim. They
are:
1. IF THE AMOUNT CLAIMED IS A LOAN YOU CAN USUALLY
LODGE IN AN INDEPENDENT EXTERNAL DISPUTE
RESOLUTION SCHEME (EDR).
See Fact Sheet: Dispute Resolution.
You have the option of lodging a dispute on the basis that you are:
a. in financial hardship and/or
b. have a reason why you do not owe the debt claimed.
If you lodge in EDR the court action stops until the matter is dealt with by
the EDR. You must lodge in EDR before the plaintiff obtains judgment.
NOTE:This is the best option in most cases
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2. DO NOTHING
If you do nothing, the plaintiff may obtain judgment against you. This
means that the court will make orders that you owe the money claimed.
3. CONFESS THE DEBT (APPLY TO PAY BY INSTALMENTS, IF
REQUIRED)
If you decide to confess the debt, you need to go to the court and fill in
the relevant forms. If you confess the debt this means that the plaintiff
has judgment against you. You can also apply to pay off the debt by
instalments. For more information see Fact Sheet: Making an application
to pay by instalments.
FACT SHEET
WARNING: DO NOT CONFESS THE DEBT UNTIL YOU GET LEGAL ADVICE!
4. LODGE A DEFENCE TO THE DEBT AND/OR A CROSS CLAIM
EXPLAINING WHY YOU DO NOT OWE THE MONEY
You should get legal advice before you do this. The defence must be
lodged with the court before the time given to respond on the Statement
of Claim expires. For a basic guide on filing a defence, see Fact Sheet:
Guide: Filing a Defence.
MAKING A SETTLEMENT
If at any time you are able to come to an agreement with the plaintiff
(such as to pay a lesser amount in full and final settlement of the debt),
you should get that agreement in writing or draw up consent orders and
make sure that it includes a requirement that the plaintiff will lodge a
Notice of Discontinuance which can be found at www.lawlink.nsw.gov.
au (follow the links to Local Court and court forms) in the relevant court.
You should get legal advice before agreeing to any settlement and get a
receipt for any amount paid.
JUDGMENT
If the plaintiff obtains judgment against you (because you lost the case,
confessed the debt or did nothing) they can do any of the following:
●●
Take and sell certain of your assets such as your TV or stereo to
cover your debt.
●●
Garnishee your wages or bank account. This means they can take
money from your bank account or out of your pay to cover your
debt.
●●
Force you to become bankrupt.
●●
Examine you in court to find out your income, assets and
liabilities.
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IMPORTANT: THE PLAINTIFF CANNOT TAKE ANY OF YOUR
POSSESSIONS, OR TAKE MONEY FROM YOUR WAGES OR BANK
ACCOUNT UNTIL THEY HAVE JUDGMENT AGAINST YOU!
For more information on what happens after the plaintiff has obtained
judgment and what can you do, see Fact Sheet: Enforcement of debts in
the Local Court.
FACT SHEET
WHAT CAN I DO IF THERE IS A JUDGMENT AGAINST ME BUT I
DID NOT RECEIVE THE STATEMENT OF CLAIM?
If you dispute that you owe some or all of the debt then you may have a
defence. You may be able to successfully lodge an Application to Set Aside
Judgment. For a Guide on this see Fact Sheet: Making an application to
set aside judgment.
If you owe all of the money and do not have a defence then usually you
will not be able to set aside the judgment. In this case you should consider
making a Notice of Motion to Pay by Instalments, or paying the debt. See
Fact Sheet: Making an application to pay by instalments and Fact Sheet:
Enforcement of debts in the Local Court.
NEED SOME MORE HELP?
See Fact Sheet: Getting Help for a list of additional resources.
Last Updated: February 2014
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