You open the post and there it is: a sealed copy of a judgment from the Local Court, with your name (or your company's name) on it as the defendant. Maybe it followed a hearing you attended; more often it followed a statement of claim that sat in a pile while something else burned. Either way, the court has now recorded that you owe the plaintiff a fixed sum. The plaintiff is now a judgment creditor. You are a judgment debtor.
What that piece of paper actually does is shift the situation from "someone is asking you to pay" to "the court has confirmed that you must pay, and the plaintiff can use the court's enforcement machinery to make you". The debt is now backed by a coercive toolkit: a writ for the levy of property, garnishee orders against your wages or bank account, an examination notice that compels you to disclose your finances under oath, a bankruptcy notice if you are an individual, or a statutory demand and winding-up application if you are a company. Interest continues to run on the judgment under s 101 of the Civil Procedure Act 2005 (NSW) and equivalent provisions in other states. Doing nothing is not neutral; it is a choice that hands the timing and the method to the other side.
There is also a window-of-time issue. A judgment in NSW remains enforceable for twelve years from the date it first becomes enforceable, under s 17 of the Limitation Act 1969 (NSW). That is a long runway for a creditor — long enough that "do nothing and hope" is rarely a survivable strategy. Twelve years is also long enough that whatever you decide in the next two weeks will probably govern what happens for the next decade.
The steps below assume you do not seriously dispute the debt. If you do dispute it and the judgment was entered in default of a defence, your first move is different — see step 1.
1. Decide within days whether to apply to set the judgment aside
If the judgment was entered because you missed the deadline to file a defence (a default judgment), and you have a genuine defence on the merits, you can apply to have it set aside. In NSW this sits under rule 36.16 of the Uniform Civil Procedure Rules 2005. The court has a broad discretion, but the practical test it applies looks at three things:
- whether you have an arguable defence (not necessarily a winning one — an arguable one),
- whether you have a reasonable explanation for why the defence was not filed on time, and
- whether setting aside would cause real prejudice to the plaintiff that cannot be cured by costs.
The most important factor here is speed. Courts treat unexplained delay harshly. If the sealed judgment is sitting in front of you, you are already on the clock — file the motion in days, not weeks. If the judgment followed a contested hearing, this door is effectively closed and you should move to step 2.
A defence that turns up purely as a stalling tactic is worse than no defence at all: it costs you money, it costs you credibility with the court, and the plaintiff will get an indemnity costs order out of it.
2. If you can pay, pay — and get a receipt that closes the file
If you have the money, the cheapest outcome is to pay in full now. Every additional week the judgment sits unpaid, two things happen: post-judgment interest accrues, and the creditor's enforcement costs (filing fees, sheriff's fees, solicitor's fees on enforcement) get added to what you owe. Those enforcement costs are recoverable from you.
Before you transfer the money:
- Confirm the exact figure including interest to the date of payment. Ask the creditor's solicitors for a payout figure with a stated good-through date.
- Pay to the creditor's solicitor's trust account, not to a personal account, and reference the proceedings number.
- Get a written acknowledgment that the judgment is satisfied, and ask them to file a notice of satisfaction with the court registry. An unfiled notice means the judgment still shows on enforcement searches against you.
If you are a company director and the company has the money but you don't, pay it through the company. If the personal exposure comes from a guarantee rather than the company itself, the calculus is different — see step 5.
3. Open a negotiation, in writing, with a number attached
Most judgment creditors are not interested in process for its own sake. They want money. A clean settlement offer — particularly a lump sum offered now in exchange for a discount, or a fixed instalment plan with security — is often more attractive to them than an enforcement campaign of unknown duration and outcome.
The standard moves are:
- A lump-sum compromise: less than the full judgment, paid within (say) fourteen days, in full and final satisfaction.
- A deferred lump sum: full amount, but paid at a future date once a known event lands (sale of a property, tax refund, completion of a contract).
- An instalment plan: fixed monthly amounts over a stated period, sometimes with the unpaid balance becoming immediately due if you miss a payment.
- A principal-only settlement: full principal, no further interest, paid on agreed terms.
Whatever you agree, get it into a written deed — usually a Deed of Settlement and Release — signed by both sides before the first dollar moves. Without a deed, a partial payment is just a partial payment; the creditor can take the money and still enforce for the balance. A deed converts the negotiation into a contractual bar.
The deed should specify the exact amount, the dates and method of each payment, what happens if you miss a payment (typically: the full original judgment becomes immediately due, less anything already paid), and a release of all claims arising from the underlying debt.
4. If negotiation fails, apply to the court to pay by instalments
If the creditor will not agree to a payment plan, you can ask the court itself to impose one. In NSW the power sits in s 107 of the Civil Procedure Act 2005: the court can order the judgment debt to be paid by instalments in specified amounts at specified times, and while that order is in force, enforcement of the judgment is stayed. Other states have equivalent mechanisms.
You will need to file a financial statement that lays out, honestly:
- income (wages, profit distributions, Centrelink payments, rental income, dividends);
- assets (real property, vehicles, bank balances, shares, business interests, superannuation in a limited way);
- expenses (mortgage or rent, utilities, food, transport, dependants, existing debt repayments).
The court is weighing whether the instalments you propose are realistic given that picture and whether the debt will actually be cleared in a reasonable timeframe. A proposal that pays the debt off in 30 years on a $20,000 judgment is not going to land. A proposal that is honest, sustainable, and clears the debt within a few years usually will.
An instalment order is not a discount — you pay the full amount. What it buys you is a stay on enforcement and a predictable monthly figure.
5. If insolvency is on the table, get advice before the creditor moves first
There is a hard floor below which you cannot stall. If you are an individual and the judgment is for $10,000 or more, the creditor can issue a bankruptcy notice — that is the prescribed statutory minimum under reg 4.02 of the Bankruptcy Regulations 2021 (Cth) read with the Bankruptcy Act 1966 (Cth). Failure to comply with a bankruptcy notice within 21 days is an act of bankruptcy and grounds for a creditor's petition.
If you are a company and the judgment is for $4,000 or more, the creditor can serve a statutory demand under s 459E of the Corporations Act 2001 (Cth). You have 21 days to either pay, apply to set the demand aside, or strike a deal. If the 21 days expire without action, the company is presumed insolvent and the creditor can apply to wind it up.
Both timelines are short and unforgiving. If you are anywhere near either threshold and cannot pay, do not let the clock run — talk to a lawyer or a registered insolvency practitioner about whether a personal insolvency agreement, a small business restructuring plan, or a voluntary administration is the right answer. Letting the creditor pick the process for you is almost always the worst outcome.
How Artificer Legal can help
If you bring a judgment to us, the first conversation is short and structured. We work through:
- Whether the judgment is final or default, and whether a set-aside application is realistic given the facts and the time elapsed.
- The full enforcement exposure — bankruptcy and statutory demand thresholds, garnishee risk against trading accounts, sheriff's seizure risk against business assets, director-guarantee exposure.
- What the creditor actually wants, which is rarely the same as what their solicitor's letter says they want.
- What you can realistically pay, and over what timeframe, without breaking the business or the household.
From there we will usually do one of three things: file a set-aside motion in the days available; open a written negotiation with the creditor's solicitors on terms that fit your cashflow, settled by deed; or prepare and file an instalment application with a financial statement that the court will accept. If insolvency is the right path, we will say so and refer you to a registered practitioner before the creditor moves first.
What we will not do is paper over a debt you cannot pay. Pretending solvency is the most expensive option on the menu.
The one thing to take from this
The judgment is not the end of the matter — it is the start of the enforcement clock. Every option that protects you (set-aside, negotiated settlement, instalment order, orderly insolvency) is available now and progressively less available the longer you wait. The creditor's leverage grows with your silence.
Becoming a judgment debtor changes the legal posture from "asked to pay" to "compelled to pay", and brings a coercive toolkit into reach for the creditor — seizure, garnishee, examination, bankruptcy notice, statutory demand. If the judgment was entered in default and you have a defence, move on a set-aside application within days under UCPR r 36.16. If the debt is owed and you can pay, pay in full and close the file with a notice of satisfaction. If you cannot pay in full, negotiate a deed-backed settlement — a discounted lump sum, a deferred payment, or an instalment plan. If that fails, apply to the court for an instalment order under s 107 of the Civil Procedure Act 2005 (NSW) or its equivalent. And if the numbers cross the $10,000 individual or $4,000 company insolvency thresholds and you cannot service them, take advice before the creditor escalates — the path you choose voluntarily is almost always cheaper than the one imposed on you.