Loans to pay a judgment debt or a commercial settlement

Commercial disputes end in one of two ways: a negotiated settlement with a payment date, or a court judgment with a sum to pay. Either way the business suddenly owes a fixed amount by a fixed day, often a large one, and often at a moment when cash is already thin from months of legal fees.

Missing that date is expensive. Settlement deeds commonly let the other side enter judgment for the full claim if a payment is late. Judgments can be enforced against the business’s goods, land and bank balances. This page explains how a short-term loan secured on property can pay the sum on time, what the enforcement steps look like if you don’t, and when a loan is not the best answer.

What happens if a judgment debt isn’t paid?

Enforcement differs by court and state, but the tools look similar everywhere. The Judicial Commission of NSW’s bench book sets out the main options for money judgments in that state:

• Writ for the levy of property. A writ against goods binds them from the time it is delivered to the sheriff, and a writ against land binds land the same way. Practically, the sheriff can seize and sell.
• Garnishee orders. These attach debts owed to the judgment debtor, such as customer payments or bank account balances, and redirect them to the creditor. Debts caught by a garnishee order must be paid within 14 days of service, or of the due date if later.
• Charging orders (Supreme and District Courts) over property such as shares or money on deposit.
• Examination of the judgment debtor about their finances.

For a company, the creditor can also serve a statutory demand. The Federal Court’s information sheet notes the debt must total at least $4,000, the company has 21 days after service to pay or apply to set it aside, and non-compliance means the company is presumed insolvent. The creditor can then apply to wind the company up within three months.

For an individual, a creditor holding a final judgment of at least $10,000 that is no more than six years old can obtain a bankruptcy notice. The Federal Circuit and Family Court’s information sheet says the debtor has 21 days to comply, and failing to comply is an act of bankruptcy on which a creditor’s petition can be based.

Our debt notice deadlines guide puts these periods in one table.

How does a loan to pay a settlement or judgment work?

1. Get the paperwork together. The judgment, orders or signed deed, and any interest or costs figures.
2. Enquire with the property details. What the property is worth, what is owing on it, the payment date and your plan to repay.
3. Receive terms and a Letter of Offer. Amount, structure, term and how interest is handled.
4. Every owner of the property signs. Solicitors coordinate the documents.
5. Funds are paid directly to the creditor or their solicitor’s trust account, with written confirmation that the judgment is satisfied or the deed performed.
6. Repay from the exit within the term.

Because the loan is secured on property, the decision does not turn on why the dispute happened or how the last quarter’s trading looked. A second mortgage or caveat can sit behind an existing bank loan, and a private first mortgage suits a debt-free property.

Which structure fits which situation?

Situation	Structure that usually fits	Notes
Smaller sum, short time to repay	Caveat loan	Quick to arrange; can later convert to a registered second mortgage
Larger sum, property has a bank loan you want to keep	Registered second mortgage	Bank’s first mortgage stays in place; check the first mortgagee’s consent requirements
Property is debt-free	Private first mortgage, 1 to 24 months	Strongest position for the lender, generally the keenest pricing
Several properties with partial equity	First or second mortgage over two titles	See using multiple properties as security

A caveat or second mortgage generally costs more than a first mortgage because the lender ranks behind another and carries more risk.

How does a loan compare with other ways to deal with the debt?

Option	Good when	Watch out for
Property-secured private loan	Creditor wants a lump sum by a fixed date	Short term; needs a real exit
Instalment arrangement with the creditor	Creditor agrees and instalments are affordable	A missed instalment can trigger the full amount
Court order for time to pay or instalments	Available where the court’s rules allow	Requires an application; enforcement risk until it is made
Selling an asset	You have a spare property or plant	A rushed sale can take less than the asset is worth
Setting aside the demand or notice	There is a genuine dispute or defect	Strict time limits; legal costs; does not make the debt go away if it is owed

If a statutory demand has already arrived, read responding to a statutory demand. If a winding-up application has been filed, the steps change; see stopping a winding-up application.

Who is this right for?

It suits:

• businesses that owe a settled or adjudged sum they accept, and need to pay it by a date;
• directors who want to protect the company from a statutory demand or a winding-up application;
• business owners facing personal enforcement on a business debt, with property to offer;
• businesses that can negotiate a discount for a prompt lump sum.

It does not suit:

• anyone who disputes the debt and has grounds to set the demand aside; get legal advice first;
• businesses that are insolvent with no realistic path to trade on, where a loan only delays an inevitable appointment;
• personal debts unrelated to a business purpose.

When is borrowing to pay a judgment the wrong move?

• The creditor will accept affordable instalments. That is often cheaper than a loan.
• There is a genuine dispute about the amount. Paying first and arguing later rarely works. Your solicitor may recommend applying to set aside the demand within the 21 days instead.
• The business cannot recover. If the judgment is one of several debts the business cannot meet, talk to an accountant or insolvency adviser about restructuring options before adding secured debt. Our page on small business restructuring plan contributions explains one route.
• The only exit is winning another case. Litigation is too uncertain to be the main repayment plan.

What it costs (without the guesswork)

The price is set deal by deal on the security, LVR, term and exit, aiming for the sharpest outcome your position allows. The costs fall into these groups:

• interest for the term, which can be prepaid, capitalised or paid monthly;
• a small assessment fee, varying per loan and shown on the Letter of Offer;
• legal and registration costs for the mortgage or caveat;
• discharge costs when the loan is repaid.

Compare that with the cost of not paying: enforcement costs, interest on the judgment, sheriff’s fees and, at worst, an external appointment. No formal valuation required also removes a third-party report from the timetable.

Illustrative example: paying a settlement before the deed’s default clause bites

Illustrative: a Brisbane commercial landscaping company settles a dispute with a former head contractor and agrees to pay $310k within 28 days. If it misses the date, the deed allows the other party to enter judgment for the full $480k claim plus costs. The company’s director owns a yard and sheds worth about $1.6m with $640k owing to the bank. At an illustrative 65% LVR band, total secured debt could reach $1.04m, leaving room of about $400k behind the bank.

Item	Amount
Second mortgage over the yard	$345,000
Less illustrative allowance for 9 months’ capitalised interest	$(24,000)
Less assessment fee, legal and registration costs	$(11,000)
Net funds available	$310,000
Paid to the other party’s solicitor on day 21	$310,000

Interest is capitalised for nine months. The exit is a mix of a retention payment due from a completed project and the sale of two surplus trucks, with a bank refinance of the yard as the back-up. Paying on time avoids the extra $170k the default clause would have added.

The figures are round and for illustration only.

Key terms at a glance

• Judgment debt: the sum a court orders one party to pay another, usually with costs and post-judgment interest added until it is paid.
• Deed of settlement: a signed agreement that ends a dispute on agreed terms. Many include a clause letting the other side enter judgment for a larger sum if a payment is missed.
• Writ for the levy of property: a court document that lets the sheriff seize and sell a debtor’s goods or land.
• Garnishee order: an order that redirects money owed to the debtor, such as a customer’s payment or a bank balance, to the creditor.
• Statutory demand: a creditor’s formal demand to a company for a debt of at least $4,000, with 21 days to comply.
• Default interest: a higher charge that applies under some loan or settlement terms when a payment is late. See the default interest glossary entry for how it works on a private loan.

Documents you’ll need

• The judgment and orders, or the signed settlement deed
• Any costs order and the creditor’s statement of interest accrued
• Any statutory demand, writ, garnishee order or bankruptcy notice already served
• Photo ID for every borrower, director, guarantor and security owner
• Title details for the security property and statements for every loan on it
• Company or trust details
• Evidence of the exit: accounts, contracts, sale plans or a refinance indication

How fast can the payment be made?

Funding is possible within 24–48 hours for up to $5m once documents are in, and smaller property-secured amounts of $20k–$250k are possible the same day. Statutory demands and bankruptcy notices run on 21-day clocks, so enquire on the day you receive one, not in the final week. Queensland businesses can read more about private lending in Brisbane.

Have a payment date? Send us the deed or judgment and your property details and a specialist will tell you what is achievable before it falls due.

Facing a judgment or settlement deadline? See if you qualify

You can enquire without any credit check, and your information stays with us rather than being sent out to a group of lenders. Every enquiry is reviewed by an experienced specialist, not an automated filter. Our lending partner fundU lends directly and looks at the property itself.

Tell us exactly what is owed, to whom, by when, and what is registered on the property you are offering. Getting those facts right up front means the answer you receive is one you can rely on. Begin your enquiry.