A new report, prepared for the Consumer Action Law Centre by Dr Eve Bodsworth of the Brotherhood of St Laurence, explores the experiences of people who have received ‘default judgments’ for debt-related problems. Each year 30,000 to 40,000 consumers receive default judgments against them in the Victorian Magistrates’ Court, often for relatively small debts. Default judgment is a court order imposed without a hearing against one party, usually the debtor being sued, because they failed to provide a defence to court action initiated by a creditor.
The impetus for this study focusing on court data and individual consumers’ experiences of default judgment came from concerns about prevalence of default judgments and the impact of such legal action on vulnerable debtors. The majority of all civil complaints in the Victorian Magistrates’ court result in default judgment (Magistrates’ Court of Victoria 2012). Of particular concern is the high number of claims for small debts which result in default judgment, given the potentially harsh and ongoing consequences for vulnerable consumers.
The impact of a default judgment on an individual or family’s financial wellbeing can be severe, particularly for people living on low incomes or experiencing other forms of disadvantage. A default judgment can result in the seizure of the debtor’s property, including the family home, or ongoing deductions from wages. A default judgment also typically results in continuing contact from debt collectors and may lead to bankruptcy or debt administration. However, for some debtors on very low incomes, a default judgment may be preferable to entering into an unrealistic repayment plan, because there are limitations to enforcing judgment debt against groups such as income support recipients. A default judgment can also have lasting effects for judgment debtors: it will be listed on their credit file for five years, restricting access to further credit and it remains enforceable in Victoria for at least fifteen years.
To read our full submission click: ‘Like juggling 27 chainsaws’: Understanding the experience of default judgment debtors in Victoria. Or access a summary version here.