When a judgment debtor refuses to pay back money they owe, an enforcement action may be required. Enforcing a judgement may involve applying for a garnishee or examination order or issuing a writ for the levy of property. Taking prompt action is essential to increase the likelihood of debt repayment.
Find out more about the options available for repayment of a judgment debt, the enforcement process and how to obtain a favourable outcome.
Let’s take a closer look.
Judgment Debts In New South Wales
When someone owes another person money and refuses to pay back the debt, they can be taken to court. The court will award a judgment debt, and the person who owes money to another individual called the judgment debtor, must settle the debt.
People sometimes need to take further action to enforce their right to financial compensation if the debtor is unwilling to pay their creditor.
Several methods can be used to enforce a judgment debt, including;
- Examination notice/examination order
- Garnishee order
- Bankruptcy or Liquidation
- Writ for levy of property
- Charging orders
In New South Wales, a creditor has 12 years to enforce the judgment against the debtor.
What Is A Garnishee Order?
A garnishee order is made when a person has a substantial debt, and does not comply with the judgment order requesting payment of money or return of goods.
A garnishee order enables the judgment creditor to take money from the judgment debtor’s bank account or wages until the debt is paid.
A garnishee order for debts may be issued to a bank; they are referred to as the garnishee.
A garnishee order for wages is addressed to the garnishee to pay money (weekly compensation amount) to the creditor to satisfy the judgment debt. A minimum amount of funds must be left to cover basic living necessities.
How To Apply For A NSW Garnishee Order?
When applying for a garnishee order, there must be a notice of motion as well as a signed affidavit which includes the following information:
- Details of the judgment debt, including the value, any accrued interest and instructions for payment by instalments
- Contact details, including the name of the judgment debtor
- Garnishee contact information and their financial relationship with the judgment debtor
- Details of costs incurred by the judgment creditor, including legal fees, court application or filing fee
Each garnishee requires an individual order, for example, one for a bank or financial institution and another for an employer.
Examination Notice And Order
After the court has established a judgment debt, they need to investigate the debtor’s financial position. An examination notice is completed and forwarded to the judgment debtor where they must provide the following details;
- Regular income, including investments, interest and rent
- Judgment debtor’s assets
- Judgment debtor’s property
- Debs and liabilities
- Employment details – including copies of pay slips
- Bank statements and bank account details
- Weekly living expenses
- Options for repayment of debt
The judgment debtor must complete the examination notice and return it within 28 days.
If the judgment debtor fails to complete the examination notice or if they return an incomplete or inaccurate form, the creditor can apply to the court for an Examination order. The order states that the debtor must attend court to answer questions and complete the examination notice.
How To Apply For An Examination Order?
When a person applies for an examination order, they must include a sworn statement/affidavit which provides details of the examination notice, including an explanation about their lack of response, details of the debt, and any relevant additional information. They will be required to submit a notice of motion, a court document explaining the need for the order. The applicant should also include the judgment debtor’s address, costs incurred, such as court filing fee, and any accrued interest on the debt.
The order will be filed and served on the judgment debtor, and a court date will be set. Examinations can be informal and often occur in court without a judge present.
What Is A Writ For Levy Of Property?
A writ is a legal document, usually issued by a federal court or another legal authority, which orders a person to perform or cease an action. In New South Wales, a writ is used to enforce a judgement.
There are two types of writs in NSW, a writ for the delivery of goods and a writ for the levy of property.
A writ for levy of property permits the local sheriff to seize and sell the property to satisfy the judgment debt. The local court can issue the writ once the application and relevant fee have been paid. If the sheriff auctions goods, there will be a levy fee payable of 3%.
The types of items tagged by the authorities can include; personal motor vehicles, cash, household furniture, real estate or land and personal electronic equipment.
A writ for the delivery of goods is a court order for goods to be returned and authorises a sheriff to seize the goods to return them to the creditor.
Timing Of Writ
There is a period between when the sheriff visits the debtor’s premises to assess the property items that will be included to sell and the auction date, which enables the debtor to:
- Pay off the debt directly
- Dispute the validity or amount of the debt
- Ask the court to permit payment of the debt in instalments
A writ is generally valid for 12 months, which provides time for assets to be sold and the debt to be fully paid. A further writ can be applied for if more time is required.
A statutory demand is a notice that is sent to a company requesting payment of a debt. Once received, the debt must be paid within 21 days, or the company can request the statutory demand notice be set aside or cancelled. This may occur when the debt is disputed, or the demand is inaccurate. A statutory demand can be issued only when the debt exceeds $4000.
If the notice is ignored, it is considered a “presumption of insolvency, ” allowing a creditor to appoint a liquidator to liquidate assets, close the business, and payout creditors after three months.
A creditor can apply for a judgment debtor declared bankrupt if they have an outstanding debt of $10 000 or more. For a judgment creditor to commence bankruptcy proceedings, an application must be made to the Australian Financial Security Authority (AFSA). A copy of the bankruptcy notice must be given to the debtor before commencing further proceedings to give them a last opportunity to repay the debt.
Liquidation is similar to bankruptcy and is used for company debts, not individuals.
A creditor may be entitled to make an application to the Supreme Court to force closure of the company due to insolvency.
The difference between liquidation and bankruptcy is that an appointed liquidator or administrator will take control of the company to:
- Identify the company’s assets and liabilities
- Commence the closure of the company
- Sell the assets to pay the debts to third parties
During liquidation, several creditors may have outstanding debts to be paid; in some cases, only a portion of the debts can be repaid after the sale of the assets.
When the Supreme Court of NSW grants a charging order, it allows the debt to be secured against a specific asset, with the intention to eventually take ownership to pay off the judgment debt. The types of assets may include; stocks or shares, monies held by a bank or financial institution or property.
When a charging order secures an asset, the following conditions apply;
- The judgment debtor is not permitted to sell or transfer the property ownership without permission
- Any third parties must also abide by the conditions stated in the charging order
- New proceedings are required to enforce the order and transfer ownership
- There must be three months before the asset can be transferred
Factors To Consider
Enforcing a judgment debt can be a complicated and costly process. A judgment creditor must choose the right enforcement option to ensure the best possible success in recovering the debt, understanding that despite obtaining a judgment order, it is not a guarantee that monies will be paid, particularly if the judgment debtor does not have sufficient assets to cover the amount of money owed. Understanding the circumstances surrounding the judgment debtor can help ensure the right enforcement option is chosen.
- Understand the debtor’s financial position, sources of income and assets before making an application
- Understand the likelihood of their cooperation
- Realise any relevant time pressures or urgency involved
- Are they a business or individuals?
- Do they owe money to other third parties?
When someone owes another person money and refuses to pay back the debt, they can be taken to court. The Federal Court will award a judgment debt, and the person who owes money to another individual called the judgment debtor, must settle the debt.
People sometimes need to take further action if the debtor is unwilling to pay their creditors.
Several methods can be used to enforce a judgment debt, including;
examination order, garnishee order, bankruptcy or liquidation, writ for levy of property or charging orders. A garnishee order enables the judgment creditor to take money from the debtor’s bank account or wages until the debt is paid.
Understanding the circumstances surrounding the judgment debtor can help ensure the right enforcement option is taken. Enforcing a judgment debt can be a complicated and costly process. A judgment creditor must choose the right enforcement option to ensure the best possible success in recovering the debt.