Car finance with a court judgment in NZ

What a judgment is, and why lenders notice it

A judgment is the end of a dispute over money. A creditor claimed you owed a debt, and either you did not respond in time or a judge or Tribunal referee decided in the creditor’s favour. It is a different record from a default. A default is a creditor reporting a late debt; a judgment is a ruling, which is why a lender reads it as a step further along.

Debts can end up in front of three bodies. Community Law says the Disputes Tribunal handles disputed debts of $60,000 or less, the District Court handles claims up to $350,000 and the High Court takes larger ones. Most personal debts, including unpaid car loan balances, land in the first two.

Fair Finance is a referral service, not a lender. We cannot promise approval, and the lender decides.

Whether it is on your credit file

Credit reporters can include public record information from the courts. Centrix says its reports may contain District and High Court judgments. The Credit Reporting Privacy Code includes judgments for money owed in the information a reporter can hold, with a limit of five years from the date of judgment.

Three points follow.

• The clock starts at the judgment date. Paying later does not shorten it, and a late payment does not extend it.
• A judgment and a default can both exist for the same debt. The default records the unpaid account; the judgment records the ruling. A lender will see both.
• Not every legal outcome is obvious. Whether a Disputes Tribunal order is listed is worth asking each bureau directly.

Get your report from Centrix, Equifax and Experian, the bureau that took over illion’s credit reporting in New Zealand, although many lenders and older pages still say illion. You are entitled to a free copy from each.

How enforcement affects your budget

Winning a judgment is not the end for the creditor. Community Law says the Disputes Tribunal’s decision is enforced through the District Court, and the court does not automatically check that an order is being followed. The creditor has to apply for each step, and the options include:

1. A financial assessment hearing. You are questioned about your finances and the registrar may order payment by instalments.
2. An attachment order. Money comes out of your wages, benefit or ACC payments.
3. A warrant to seize property. A bailiff can seize goods to sell, with some items protected.
4. A charging order or garnishee order. These tie up property or take money from a third party such as a bank.

Community Law also says the court can only enforce a judgment within six years of it being made, although payments can extend that.

If a deduction is already coming out of your pay, a lender will count it as an existing commitment. That is the practical way a judgment changes your options: it can shrink the repayment you can show you can carry. Consumer Protection notes that a judgment debt goes on your credit record and the creditor can then seek an attachment order against pay or a benefit.

Paid, on a plan or unpaid

• Paid in full. The best position. Get written confirmation from the creditor with the date, and ask that it is reflected on your file.
• On a steady plan. Instalments set by the court or agreed with the creditor, kept up for several months, show you are managing it.
• Unpaid and being chased. The weakest. Many lenders will want this dealt with before they will consider a new loan.

If you cannot pay, a free financial mentor can negotiate with the creditor. MoneyTalks is on 0800 345 123.

If you think the judgment is wrong

A judgment entered because you missed the deadline is not the same as one decided on the facts. Community Law says that if you do not file a defence in 25 working days a default judgment may be entered. If you think that happened wrongly, or the debt was never yours, get advice from a Community Law Centre quickly. Removing a judgment from the file entirely is hard, and correction of a plain error on the file is a separate matter for the credit reporter. The reporter has to decide a correction request within 20 working days or tell you why it needs longer.

What lenders look at

1. How long ago. More time since the judgment, with no new problems, is the strongest signal.
2. What it was for. An old store account reads differently from a car loan.
3. Its status. Paid, on a plan or open.
4. What is being deducted now. Attachment orders and instalments reduce spare income.
5. Your income and stability. See minimum income for car finance.
6. Anything else on the file. Defaults, a repossession or other judgments add up.

A worked example (illustrative only)

These are round, made-up numbers. They are not a quote.

You earn $1,000 a week after tax and a $60 weekly attachment order comes out of it. You want a $6,500 car with $1,000 down, so you borrow $5,500. At an example rate of 23.95% over 30 months, repayments are roughly $245 a month, or about $57 a week. A lender then sees $60 going to the attachment order and $57 to the car, which together leave plenty of room on the example pay but less if your weekly costs are tight.

If the judgment were paid, the $60 deduction would stop and your budget would look looser. That difference is why clearing a judgment can matter more than almost anything else on the file. Use the repayment calculator to test your own figures, and keep room for rego, insurance and fuel.

Steps to take, in order

1. Get the paperwork. Judgment date, amount, who the creditor is and any court reference.
2. Get your three reports. Check the judgment and any matching default.
3. Settle or arrange payment. Ask for written confirmation of any payment or plan.
4. Fix errors. Ask the reporter to correct entries that are wrong.
5. Build a clean run. Pay everything else on time.
6. Apply once. A single soft check through a referral service avoids a string of hard checks.

Red flags

• Anyone who offers to get a judgment “removed” for a fee.
• A lender or dealer that treats approval as settled before seeing your file.
• Pressure to sign the same day, or fees and add-ons not explained.
• A quote that will not show the total cost of credit.

Under the CCCFA, lenders must check affordability and be upfront about costs.

Cheaper options

• Good Shepherd Good Loans. No-interest, fee-free loans of up to $7,000 for a car, with income limits and other criteria.
• MoneyTalks. Free budgeting help and help talking to creditors.
• Community Law Centres. Free initial legal advice on a judgment.
• A cash car while the judgment is cleared.

If you think the car loan behind it was unaffordable

Some judgments trace back to a car loan the borrower never really could afford. Lenders must take reasonable steps to check that a loan is suitable and affordable before they lend. If you believe that did not happen, get advice before you give up, because the finance company’s dispute resolution scheme can look at the complaint. Consumer Protection lists that scheme as the place to go for unfair conduct, and free advice is available through a community law centre and Christians Against Poverty (0508 227 111).

Be realistic about what this does. A complaint does not undo a judgment already entered, and it will not make a lender approve a new loan. It can matter if a shortfall, fee or interest was added after a sale when it should not have been, since the lender cannot add interest, penalties or collection costs once the car is sold.

Complain as soon as you can, and ask the scheme what time limits apply to you.

How Fair Finance helps

You answer a few questions once and we run one soft credit check. It does not affect your score and other lenders do not see it. We then refer you to lenders on our panel who consider applicants with judgments in their history. A hard check only happens later, if you choose a specific lender. If the right move is to clear the judgment first, we will say so. Start with the eligibility check or see how it works.

General information only, not financial or legal advice.

Sources

• Privacy Commissioner: Credit Reporting Privacy Code 2020
• Community Law: how debts are recovered through the courts
• Community Law: enforcing a Disputes Tribunal order through the District Court
• Consumer Protection: payment problems
• Centrix: personal credit information
• Good Shepherd NZ: Good Loans
• MoneyTalks
• Consumer Protection: Loan for your car
• Christians Against Poverty NZ: Vehicle finance