In Civil Litigation, if you owe money you are called the debtor, and the person or company that is owed money is called the creditor.
Once a problem becomes apparent to a creditor, you may 1st receive a letter of demand stating how much you owe and when this needs to be paid before legal proceedings will begin.
The next step is that the creditor will file in court, a Statement of Claim. This will be served upon you, and this means that the creditor has proceeded with legal action against you. You have 28 days to respond to this.
If you do not respond to the Statement of Claim, the Court will order that the money is owing to the creditor. This is called a Judgement Debt. It is not too late to reverse this, but you need to explain your reasons for not responding to the Statement of Claim referred to earlier.
Once the Court has made the order that you are to pay the debt, you are now called the “judgement debtor”, and the creditor is called the “judgement creditor”.
The Judgement Debt is “entered” and the judgement creditor has 12 years to take further action in which to recover their debt.
Your response to the early stages of this process can save much heartache and money at a later date. If you receive a letter of demand, read it carefully. The amount owed could be completely wrong, but if you do nothing through the process outlined above, you may be ordered by the court to pay the incorrect figure plus interest and costs. Communication with the creditor is vital in the early stages, as is the 28 day period after you have been served with a statement of claim.
Next week we’ll discuss what the creditor can do to enforce the judgement debt.
If you have any questions you would like answered either confidentially or via this medium, please email us at office@mjolegal.com.au
This is intended for general information and does not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought.