Default Judgment – setting aside to repair your credit rating

A judgment entered by default occurs when the Plaintiff (the person who is owed money) proves to the Court that the Claim has been served on the Defendant (the person who owes the money) under the relevant court rules and that the Defendant has not entered a defence in the timeframe under the relevant court rules.   

Where the debt is disputed or there has possibly been an irregularity of service of the claim or judgment being entered, an application to the Court can be made to set aside default judgment.  This article will focus on the scenario where any outstanding amounts have been paid but the default judgment is still on the court record and affecting your credit rating.

Default judgment is not the same as a contested court case where a Judge or Magistrate makes a ruling that the money is owed and enters that judgment.

There are a number of reasons default judgment may be entered without the Defendant being aware of it.  Often the Defendant will find out that they owe the money, pay the money but not realise that Default Judgment has been entered.   The default judgment will not be discovered until later when an application for a loan is made and the Defendant’s credit record is looked at. 

A poor credit rating affects how a lender views the risk of providing the loan amount to a person.  As a result they may refuse to lend the money or impose a higher interest rate.

Provided the debt has been paid, it may be possible with the consent of the Plaintiff (creditor) to apply to the court for the default judgment to be set aside and the proceedings dismissed.  Large institutional creditors such as governments and banks are usually willing to help providing their costs of doing so are paid.   After a judgment is removed you can notify the credit agency and advise the prospective lender.

It is vital that proactive action is taken and for cooperation with creditors to avoid the risk of having default judgment entered against you.  This may save you thousands of dollars in future interest payments.

At Hillhouse we can assist you through this process and advise you on the best way forward with the creditor, the new lender and the Court.

If you would like further advice about setting aside a default please contact me at robert@hillhouse.com.au or call 07 3220 1144.

The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.