Recovering monies from debtors can be a lengthy, exhausting and costly exercise. Most people would think that once a garnishee order has been issued by the court then the debt would be quickly recovered, however it is not uncommon that once executed, funds in an account are no longer available. In circumstances such as this often clients will ask the question, what happens next in relation to my garnishee order?
What is a Garnishee Order?
A Garnishee Order is an order of the Court which allows a judgment creditor to recover or ‘garnish’ a third party in respect of an amount owing to the judgment debtor. The third party can include a bank, an employer, a purchaser of the debtor’s property, or any other entity/individual that holds money on behalf of, or owes money to the debtor.
But what happens when there are insufficient funds?
Sometimes people run into situations where the Garnishee Order is issued but no recovery is made. This might be because there are insufficient funds in a bank account to pay the amount in the Order. For those who are patient it is useful to remember that ordinarily judgment debts are enforceable for 12 years from the date the judgment was entered. In the meantime, the following avenues can be considered as a means for recovering the debt:
- Examination of the Debtor
An Examination Notice can be served on the debtor, which is a court order compelling the debtor to provide information and documents regarding the debtor’s income, expenditure, assets and liabilities. This can be a useful mechanism if you lack information regarding the debtor’s financial position and would like to know how best to enforce the judgment debt.
The debtor has 28 days to comply with an Examination Notice and if it is not complied with, then you may apply to the Court to issue an Order for Examination. An examination notice is considered not complied with if it was ignored completely, or if the debtor did not provide all the information and/or documents requested.
An Examination Order requires the debtor to appear in Court at an Examination Hearing to be questioned and produce evidence of their financial circumstances. Although a formal process, this is not normally conducted as a formal hearing, but rather an informal discussion between the creditor and the judgment debtor where a magistrate or Registrar is present to intervene if the debtor is not answering questions.
However, if a debtor fails to appear at court for the Examination Hearing a warrant for the debtor’s arrest may be sought from the court by the judgment creditor. This can be issued on the judgment debtor once fourteen days have passed from the date of the examination hearing and the debtor has failed to respond. Once issued, a sheriff will arrest the debtor at their property and take them to court to be examined.
- Apply for a Writ for Levy of Property
A Writ for Levy of Property can be used to recover monies from the judgment debtor by ordering a sheriff to attend an address and ‘seize’ the debtor’s property and sell it. The money made from the sale of the goods can be used to pay the monies owed by the judgment debt. Once issued, a writ for the levy of property can be used for 12 months and if it expires without the monies being recovered, then you may apply for another writ.
- Garnishee Order
A further Garnishee Order can be issued if new information about the debtor becomes available. The benefit of Garnishee Orders is that they can be issued on the same garnishee multiple times. Therefore, should a Garnishee Order by issued on a bank, but not recover any monies at that time, a Judgment Creditor may choose to wait a further period of time and issue an additional Garnishee Order to the same bank.
- Investigation
If further investigation into the debtor is required, then skip tracing is a useful tool to locate any additional information that may assist to locate you to collect the Debt. Skip tracing is usually done by collection agencies who employ a range of investigative techniques to trace the debtor through public records, credit reports and social media platforms. This is particularly helpful for those debtors who are hard to locate or has been avoiding the service of legal documents.
- Bankruptcy
A judgment creditor may seek to bankrupt a debtor, which can allow access to significantly greater powers or recovery and investigation by a bankruptcy trustee, as well as recovery of voidable transactions and liability of the bankrupt to make income contributions under the Bankruptcy Act.
Although an unsuccessful garnishee order can be frustrating it is by no means the end of the road for a creditor attempting to recover a judgment debt.
Matthews Folbigg Lawyers has a specialist team dedicated to Insolvency, Restructuring and Debt Recovery.
If you would like more information or advice in relation to debt recovery, contact our Principal Stephen Mullette on (02) 9806 7459 stephenm@matthewsfolbigg.com.au or Jeffrey Brown on (02) 9806 7459 jeffreyb@matthewsfollbigg.com.au