top of page

Last updated: December 2022

The information set out on this page is intended as an introduction only and should not be relied on in place of legal advice.

To make contact with a legal centre specific to your location

Consumer Credit Law Centre (State-wide)

Advice on consumer credit problems including debt, hardship, credit law issues involving disputes with creditors, bankruptcy, mortgage stress, inability to negotiate payment plans and conduct by creditors.

An emergency hotline has been set up 0428 458 811

If you owe money to someone (called a creditor), they can apply to the Magistrates’ Court for an order that the debt must be paid. Once a judgment has been made against you by a magistrate declaring that you owe an amount of money, interest will accrue at the penalty interest rate on top of the original debt.

The Courts Administration Authority describes how Court deals with matters under $12 000

Negotiating with the creditor
You can try to negotiate with the creditor to repay the judgment debt either by instalments or as a lump sum. If you have a lump sum of money that is less than the actual debt, you should try to negotiate with the creditor to accept the lump sum and waive the remainder of the debt. For example, if you owe $5,000 and you offer $3,000, this might be enough to finalise the debt. It is always worth trying to negotiate with the creditor in this situation.

Alternatively, you could offer to repay the debt in instalments. The amount that you offer to pay over a set period should be reasonable, in proportion to the amount of the debt and your financial circumstances, or the creditor is unlikely to agree. If you make an offer to repay the debt by instalments, you should try and come to an arrangement with the creditor that interest will cease to accrue during the repayment period.

What are the most common methods of enforcing a judgment debt?
If a judgment has been entered against you and the debt remains unpaid, the creditor has the right to enforce payment of the debt.

If you are unable to pay your debts and cannot come to a suitable repayment arrangement with your creditor, you may voluntarily lodge a petition to become bankrupt (called a debtor’s petition) or the creditor may take action to have you declared bankrupt by order of the Federal Court or Federal Circuit Court (called a sequestration order).

If you are declared bankrupt, the Bankruptcy Trustee has responsibility for dealing with all monies you owe and any assets you have. The trustee will determine if your money or assets can be used to pay your outstanding debts.


Bankruptcy normally lasts for three years and one day. The following consequences/restrictions apply while you are bankrupt:

- your house and vehicle may be sold
-if your income exceeds a certain limit, you may be required to pay a contribution from your income
- you cannot manage a company unless you have permission from the court
- you will not be allowed to travel overseas without the permission of the trustee
- you will be recorded on the National Personal Insolvency Index forever
- you will find it difficult to borrow money and buy things on credit.


You should get advice from a financial counsellor if you are considering bankruptcy.

bottom of page