If you've been issued a default judgment for an unpaid debt, it's important that you act quickly and respond in the appropriate manner. Whether the claim form was sent to the wrong address or the debt has already been repaid, you must follow the same procedure. If you're currently dealing with this problem, this guide will set out the steps you must follow.
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What is a default judgment?
A default judgment is a type of court order that is issued by your creditor (the company you're in debt to) if you fail to file a defence or respond within a given timeframe (usually 14 days). If you respond within 14 days, you'll get an extra 14 days to submit a defence before a default judgment is issued.
The existence of a default judgment means that you are legally required to pay the debt. It also gives your creditor the right to take further action, such as sending enforcement officers (bailiffs) to your property or applying for an attachment of earnings or charging order against your home.
Many people receive a default judgment for a County Court Judgment (CCJ), which is a formal court order issued against you if you have continually failed to repay a debt that you owe and your creditor (known as the claimant) has taken court action to recover the debt.
Having a judgment can have far-reaching consequences and affect your financial stability for several years. For example, as well as being visible on your credit file and damaging your credit score for six years, most lenders will be hesitant to give you any form of credit, including a credit card, loan, mortgage, phone contract, or bank account.
A default judgment will also be recorded on the Register of Judgments, Orders, and Fines for six years, which is an online database containing details of everyone with court judgments and fines in England and Wales. This register can be accessed by anyone, but is usually only used by lenders and banks to decide whether to give you credit.
What happens if I don't pay a default judgment?
Even if you don't agree with the default judgment, you must never ignore it. Doing so can lead to a damaged credit history, which can make it difficult to obtain credit for several years and result in enforcement officers visiting your property and seizing your belongings to repay the debt.
Other actions that can happen when you ignore a default judgment include money being deducted from your wages or the debt being secured to your property, putting your home at risk.
This also doesn't give you an opportunity to let the court hear your side of the story, so they will likely assume that you believe you owe the debt but are refusing to pay it.
When can the court set aside a default judgment?
The court will only agree to set aside a default judgment in certain situations. We've explained these situations below:
If the claim form was sent to the wrong address
Generally, claim forms are sent to the last known address of the debtor, which isn't always up to date. If you didn't receive a claim form and weren't able to respond within the given timeframe or attend a court hearing because it was sent to a former address, you can argue that you were not aware of it and, therefore, were not given a fair chance to file a defence in time.
If you didn't receive the claim form in enough time
Even if the original claim form was sent to the correct address, it may have arrived when you were not at home (e.g. you were away for work or travelling). As a result, you may have missed the deadline to respond or file a defence.
If the default judgment was wrongly entered
If a default judgment was entered in error (e.g. the debt was satisfied before the judgment was entered or you filed a defence within 14 days) and you can provide proof of this, the court should agree to set it aside.
However, while it's worth filing a defence in these circumstances, civil procedure rules technically state that a claim form sent to your last known address is still legally served, as the 14-day timeframe to respond starts from the date of deemed service, not when you first receive it. In short, the court will consider the reason and make the final decision on whether your case has grounds to be set aside.
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Check my eligibilityHow to set aside default judgment
To set aside a default judgment, there is a set procedure you should follow. It's important that you act promptly.
The first thing you should do is notify your creditor of your intention to set aside a judgment for a money claim. If they agree, you can sign something called a 'consent order', which is a much cheaper and faster process. However, if they object to you filing a defence, you must fill out an 'application notice'.
To do this, you must complete and submit the court form (N244). A court fee is also payable when you submit your application, which can be up to £321. You may be able to get this fee fully or partially waived if you receive certain means-tested benefits or if you're on a low income or unemployed.
In your application notice, you must include a witness statement that clearly sets out the facts of the case (e.g. why you didn't respond before the deadline) and proves that you have a reasonable prospect of successfully defending the claim (e.g. bank statements, receipts, or contracts).
You may be invited to a private court hearing to argue your case, after which a district judge will decide whether to set aside the judgment. It's important to attend a court hearing if you're invited to one. Failure to do so can result in your application being rejected, and you'll also have to pay the debt.
During the court hearing, a judge will carefully weigh the need for litigation to be conducted 'efficiently and at a proportionate cost'.
If you successfully get the judgment set aside, the case will continue as a defended claim. In other words, the debt will revert to the state it was in before the judgment was entered and additional costs may be imposed. However, it will be removed from your credit record and the public register.
What is the difference between a mandatory and discretionary set-aside?
A mandatory set-aside is when the court must set aside a default judgment because a procedural rule was broken. Examples of this are when a judgment was entered before the 14-day deadline to respond expired, when the debt was fully repaid before the judgment was issued, or the claim form was not served to the correct address. There is no time limit for mandatory set aside applications.
A discretionary set-aside, on the other hand, is when the judgment was entered correctly, but the decision is made on discretionary grounds, and the court chooses whether to cancel a judgment based on the evidence provided. If you have a real prospect of defending the claim or there appears to be some other good reason, the court is likely to set the judgment aside.
What happens if the court rejects a defendant's application to set aside a default judgment?
If your application to grant relief and set aside or vary a default judgment is rejected, the debt will still exist, and your creditor will be free to take legal action to enforce the debt. You may also have to pay your creditor's legal fees for attending the court hearing and for the paperwork involved in the failed application, which can be costly.
The judgment will also remain on your credit file and the public register for six years, severely impacting your ability to borrow credit during that time.
If you believe the judge made a legal error or reached the wrong outcome based on the evidence provided, you can attempt to appeal the decision. However, this must be done within 21 days of the decision.
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Conclusion
If you think you were served a default judgment in error, you may be able to get it set aside by completing and returning a form (N244) to the court. A judge will then review your request and decide whether or not to set aside the judgment.
Some of the situations where you might be able to get a default judgment set aside include a claim form being sent to the wrong address or a claim form being sent after the debt was settled.
It's important to seek guidance on how to deal with a default judgment as soon as possible. Failure to respond to the original claim form will result in a default judgment being entered against you, which can impact your credit score and ability to obtain credit for several years.
