What to do if you receive a ‘Complaint’/Form 5a

If you do not pay a debt, a creditor may send you a notice or letter of demand – also known as a final notice – before taking legal action. You have the right to dispute your debt but this needs to be done promptly and lawfully.

If you do not pay the debt, or other arrangements are not made, the creditor may start proceedings in the Magistrates’ Court by issuing a Statement of Claim or Complaint Form 5A to formalise the money owed to them.

Note: Depending on where you live, formal documents could be called a claim, statement of claim, a complaint or a summons.

You cannot be sent to jail for not paying a debt. However, you can go to jail for refusing to attend court if you are given a summons or if you refuse to comply with a court order.

What happens if you receive a statement of claim or a complaint letter?

  • The complaint will be delivered (served) by an authorised person to an adult at your home. Do not ignore this letter. It means legal action has started against you. You can still try to negotiate a payment plan with your creditor.
  • If you do nothing, after 28 days a judgment will be made against you. This is called a ‘judgment debt’. If this happens, you may have to pay the debt, the creditor’s legal costs, and any interest on the debt. You will not receive any formal notification that this has happened.
  • If you believe you don’t owe the debt, that you only owe part of the debt or that you have a valid defence, you need to get legal advice within 21 days of receiving the complaint or as soon as possible.
  • If you defend the Statement of Claim and lose, the creditor’s legal costs will be added to the debt.
  • If the court enters a judgement against you, the creditor has up to 15 years to collect the debt.

Negotiating a payment plan with your creditor

You can still pay the debt off after you have received a complaint. The creditor will probably also want you to pay their legal costs. You will need to negotiate with the creditor about how you will pay. Once this is done, make a written agreement with the creditor. Do this before any actual court hearing begins. Make sure the creditor files a Notice of Discontinuance with the court. This will stop the court action against you.

I didn’t defend and judgement has been entered. What happens now?

The creditor has a range of options to recover the money:

  1. Oral Examination
    This means you may be served with a summons to appear in court to be questioned about your financial position. You must attend – failure to attend may result in your arrest.
  2. Warrant to seize property
    The court could issue an order to the Sheriff to seize and sell your property to pay the amount stated in the warrant. There are strict rules on what property they are allowed to seize – the Sheriff CANNOT take
  • Essential household items and furniture (necessary for your household’s domestic use)
  • One vehicle valued under an indexed amount ($8,000 as at 20th March 2020)
  • Tools of trade up to an indexed amount ($3,800 as at 20th March 2020)
  • Property that is rented, mortgaged, on hire-purchase, or belongs entirely to someone other than the judgment debtor
  • Any item that would be protected in bankruptcy proceedings.
  1. Instalment order – The creditor can apply for a court order forcing you to pay the debt in instalments. If this happens, make sure that you give the court enough information about what, if anything, you can afford to pay.
  1. Attachment orders
  • Attachment of earnings is an order to your employer to deduct instalments directly fr m your salary.
    Attachment of earnings CANNOT be applied to social security payments/Centrelink payments.
  • Attachment of debt is an order to a person who owes you money, to pay that money directly to the creditor instead of you.
  1. Creditor’s petition for bankruptcy (sequestration order)

If the court order is more than $5000 (This limit has been temporarily increased to $20,000 due to COVID-19), a creditor can ask for a court order (petition) for your bankruptcy. If the order is made, a bankruptcy trustee gets control of your debts and assets. The trustee has to work out if, and how much, your creditors can
be paid.

Creditors will probably take this action if they believe you have valuable things such as real estate, or that you are avoiding a debt you can pay. If you receive a court order for bankruptcy, get legal advice or call Anglicare Victoria’s financial counselling service immediately.