If you take no action or do not reach a satisfactory agreement and have not filed a defence within 28 days after you receive the claim, the creditor can ask for judgment on the debt without your involvement or knowledge. This is called default judgment because you have not answered the claim with a defence.

Judgment can also be obtained if you file a defence but do not go to court for the directions hearing or trial, or if you lose your case after a hearing or trial (in other words, if your defence is unsuccessful).

The Court enters judgment on your debt which means that you legally owe the money. You will not be notified that this has happened. The creditor can now take other action through the court to recover the debt, which is called enforcement.

How do I apply to set aside a default judgment?

If default judgment is entered against you in relation to a debt, you may be able to apply to the court to set aside the judgment. You may apply to have the judgment set aside by filing an Interlocutory Application (Form 77) and supporting Affidavit (Form 12), setting out the reasons why judgment should be set aside.

There are a number of grounds on which you may apply to have judgment set aside, including:

When applying to set aside the default judgment, you must seek the court's permission to file a defence (and/or cross claim). You may wish to include a copy of your draft defence (and/or cross claim) as supporting documents to the Interlocutory Application.

If you wish to admit the creditor's claim, then an application to set aside default judgment may not be appropriate. Seek legal advice before applying to set aside default judgment.

What can the creditor do now?

The creditor can now take enforcement action. They can:

The creditor can also go to the Federal Court to make you bankrupt, although this is unlikely unless you own assets such as a house or you have a high income.

All of these actions can have a huge impact on you and your family, particularly if you have assets. Get legal or financial counselling advice to understand your options.

Investigation Notice

The creditor may serve you with an Investigation Notice (Form 140) requiring you to answer a questionnaire and provide information about your means to pay the debt within 28 days [Enforcement of Judgments Act 1991 (SA) s 3A and Uniform Civil Rules 2020 r 203.3A].

If you can negotiate a payment arrangement, this can be lodged with the court to make the order using a Consent to Order for Payment (Form 142) [Uniform Civil Rules 2020 r 203.5].

If no payment arrangement is negotiated, the creditor can lodge an Application to Enforce Form 141 in the usual manner.

Investigation Hearing

The first enforcement action the creditor takes in the Magistrates Court is a summons to the debtor to appear at an Investigation Hearing [Uniform Civil Rules 2020 r 203.4]. If the judgment is for less than $12,000 and does not arise out of the carrying on of a business, this is the first enforcement process that the creditor is allowed to take, unless they make an application.

The purpose of the investigation hearing is to determine whether you can pay the debt and if so, how you will pay it. It is not a chance to deny that you owe the debt. If you deny that you owe the money, get legal advice as soon as you receive the claim.

Some people may find the court process confusing and stressful. There are several important things for you to know before going to court. The process and your options are discussed in more detail below - see Investigation Summons.

Garnishee Order

The court may order that a debtor's money held by a third party (such as their bank or employer) be paid directly to the judgment creditor (known as a garnishee order). This can be ordered without the debtor's consent and to the extent the court considers appropriate, but the debtor's net weekly salary or wages after tax must not be garnished such that the debtor is left with less than 90% of the weekly national minimum wage under the Fair Work Act 2009 (Cth) [Enforcement of Judgments Act 1991 (SA) s 6].

Take your goods – Warrant of Sale

If the debt is $12,000 or less, the creditor is required to issue an investigation summons first, but if you fail to appear at court or miss 2 or more payments, the creditor can issue a warrant of sale without further notice to you [Uniform Civil Rules 2020 (SA) r 203.2].

The court has the power to authorise the seizure and sale of your property (land and personal property). This means a sheriff will come to your house to make a list of things that could be taken and sold to pay your debt. They cannot take items that would be protected in bankruptcy such as household goods and personal things, such as a car (valued under a certain amount) and tools of your trade (under a certain amount).

Note: If you have a car or tools of trade worth more than the protected amount, the sheriff could take the item/s and apply the whole amount of the sale proceeds including the protected amount to the debt.

After the amount of the claim, plus court costs and interest, are taken out of sale proceeds, any remaining amount will be given to you.

The creditor can have a warrant of sale issued against your house if there is available equity (any money you owe on a mortgage is less than the value of the house). However, where the debt is $12,000 or less, a warrant of sale against your house (land) may not be issued unless a warrant of sale of personal property (goods) has first been issued, and has not satisfied the debt [r 203.2(4)].

Charging Order

A legal charge may be placed on your property. This will not immediately benefit the creditor but will allow them to retain a legal interest in your property and have a claim to some or all of the proceeds when you sell that property [Uniform Civil Rules 2020 rule 203.14].

Force you to become bankrupt

The minimum amount of debt for issuing a bankruptcy notice is $10,000. If the judgment debt against you is $10,000 or larger, and you fail to respond to the bankruptcy notice within 21 days of the issue of the notice, the creditor can start the process of applying to the Federal Court to have you declared bankrupt.

The creditor is unlikely to do this if you do not have assets such as a house or car as they will have to pay an initial fee. You may choose to become bankrupt voluntarily. Please see Paying a debt and Bankruptcy for more information.