Debt Recovery - Enforcement
Obtained your Order?
Now … how do we enforce it?
Enforcement avenues can be one or a combination of the following…
Examination
Examination is a process of obtaining information from a judgment debtor. An examination notice must first be served on the judgment debtor. It is in the form of a questionnaire of the assets, liabilities, income and expenses of the judgment debtor.
If the judgment debtor fails to reply within the time limit specified in the examination notice, then the judgment creditor may apply for an examination order. The judgment debtor is ordered to attend court to disclose their information to the judgment creditor.
Upon multiple failures in attendance for examination, an arrest warrant may be issued on application of the judgment creditor. This authorises any competent authority (e.g. NSW Police) to arrest the judgment debtor for failure to attend court.
Garnishee
The garnishee order is an order of the court which in essence allows redirection of money owed to the judgment debtor, such as wages and debts. A bank account balance is treated as a debt owed by the bank to the judgment debtor. That is, if a garnishee order is served on the bank, the bank is ordered to deduct the amount from the judgment debtor’s bank account. The garnishee order may also be served on the employer of the judgment debtor.
If the garnishee fails comply with the garnishee order, they are become liable for the payment of the judgment debt, upon application by the judgment creditor and satisfaction of the court.
Writ of execution
A writ of execution allows the sheriff to take action against the property of the judgment debtor. Property may be real or personal property. We will focus on the commonly used Writ of Levy of Property which enables to the sheriff to levy, and sell the personal property of the judgment debtor.
The sheriff will be directed by the court to attend to the property of the judgment debtor.
On the first visit, the sheriff will select items available to be disposed of by way of public auction, and mark those items (e.g. motor vehicles, office equipment).
It is an offence for anyone to dispose of or destroy the marked items. If the judgment debtor is not the owner of the items, then the true owner must file an affidavit with supporting evidence (e.g. receipts) as to the ownership of the items.
On subsequent visits, the sheriff will begin auctioning off the marked items, with the proceeds to be applied towards the judgment debt.
Bankruptcy/liquidation
Bankruptcy and liquidation are both procedures make an entity insolvent. Bankruptcy refers to individuals, whereas liquidation refers to corporations.
As a general principal, bankruptcy and liquidation are last resort procedures, relied upon after thorough assessment of the advantages and disadvantages. This is because in bankruptcy/liquidation, creditors must rank amongst all other creditors by priority in which they are paid out.
Creditors are paid proportionately on the size of their debt compared to all outstanding debts, and generally should not expect to receive the full value of their debt (depending on the circumstances).
Contact us for specialised advice on bankruptcy/insolvency.
Note that contents contained herein are general information only and are not intended to be legal advice. For legal advice, please contact our office direct.