Request a waiver because you are judgment proof

What does it mean to be judgment proof?

If a Court makes an order that you must pay money, then there are several ways that the credit card company / debt collector can enforce the order to make you pay.

For example:

  • A summons for oral examination is an order directing you to go to Court to give evidence of your income, assets and liabilities to a registrar.
  • A warrant gives the Sheriff the power to seize and sell your car or other property; or
  • An attachment or earnings order will mean that your employer must garnish your salary to pay off the debt by instalments;

However, there are certain rules that apply, for example:

  • The Sheriff cannot seize your car if it is worth less than $8700[1]; and
  • If you receive social security payments as your sole source of income, the Court cannot make you pay off the Court order by instalments[2].

You are said to be “judgment proof” if there are no enforcement methods that will work, to make you pay the Court order.

For example:

Paul receives a disability support pension from Centrelink, and rents, and owns a car worth approximately $5000. Credit Corp sued him in the Magistrates Court and the Court made an order that he must pay Credit Corp approximately $32,000. Credit Corp purchased a warrant but it was returned to the Court un-satisfied because Paul’s car was worth less than $8700. Credit Corp then issued Paul with a summons for oral examination. Paul went to Court and told the registrar that he received the disability support pension and that he owned a vehicle worth approximately $5000. When Credit Corp realised that it would not be able to enforce the Court order, it decided to take no further steps with the Court. Eventually, after 15 years, the Court order became unenforceable[3].

[1] See r68.10 Magistrates Court General Civil Procedure Rules 2010 (Vic); s42 Supreme Court Act 1986 (Vic); s116 Bankruptcy Act 1966 (Cth); r6.03 of the Bankruptcy Regulations 1996 (Cth).
[2] See s12 Judgment Debt Recovery Act 1984 (Vic).
[3] See s5(4) of the Limitation of Actions Act 1958 (Vic).

Why does it matter if I am judgment proof?

It matters because a credit card company / debt collector if often willing to waive your credit card debt if you are judgment proof.

Why would a credit card company / debt collector want to waive my credit card debt just because I am judgment proof?

It costs the credit card company / debt collector money to bring court proceedings against you. It also costs money for them to purchase a warrant or apply for an instalment order with the Court. Each step in trying to enforce the Court order costs money.
If the credit card company / debt collector knows that it will be unsuccessful in recovering any money from you, then it would rather not spend any money on the Court process at all.
If you write to the credit card company / debt collector and show them that you are judgment proof, then they are likely to consider your claim as it may result in them saving costs in pursuing you in the future.

How do I claim that I am judgment proof?

You can use the Credit Card Debt Assistance Tool to generate a letter that you can send to your Credit Card Provider / Debt Collector.

The Credit Card Debt Assistance Tool will help you
request a waiver if you are judgment proof

This tool will:

  • Ask you some questions about your credit card debt and your general situation;
  • Determine whether you are like to be considered “judgment proof” based on your answers;
  • If you are considered to be judgment proof, generate a letter requesting waiver that you can send to your credit card company / debt collector.
  • Send you an email with a link to the letter and some other information to help you understand the law as it applies to enforcement of Court orders.
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