Enforcing Payment of a Judgment Debt

Enforcing a judgment debt in New South Wales refers to the legal processes that a creditor can undertake to compel a debtor to pay what they owe pursuant to the orders contained within a court judgment.

When a creditor has obtained a judgment against a debtor and the debtor fails to pay the judgment debt amount voluntarily after being issued with post judgment demands for payment, there are several enforcement measures available under NSW law. Laws in other states have similar enforcement methods but for the purposes of this article we will concentrate on NSW enforcement procedures.

The three methods for enforcing a judgment debt under NSW state law include:

1. Financial Examination of a Judgment Debtor
2. Garnishee Orders
3. Writ of Execution or Writ for the Levy Property

Financial Examination of a Judgment Debtor

Examination Notice

The procedure for starting the examination process is to issue an Examination Notice. The Examination Notice is an income and expenditure form that is issued to the judgment debtor requesting that they provide (within 28 days) a proposal to pay the debt along with information and documentation to support evidence of their current financial position.

This will include information about their employer, who they bank with, their income, assets, and other debts. This information can help the parties agree to an instalment arrangement or can provide the creditor with information which might assist them in determining how they might proceed with other enforcement options.

Examination Order

If the judgment debtor does not ​comply with the Examination Notice within 28 days, the creditor can file a motion with the court requesting that an Examination Order be issued against the judgment debtor. This is an order that the judgment debtor must attend a court hearing to answer questions and show documents about their financial position. This is called an “Examination Hearing”.

A creditor can apply for an Examination Order if the judgment debtor:

• ​​​​ignores the Examination Notice completely; or
• partly fills in the Examination Notice but does not provide all the information requested; or
• provides all the information, but they do not provide any supporting documents.

The judgment debtor becomes the “Examinee”. The Examination Order (order to attend court) must be personally served on the Examinee and the Examination Hearing will take place usually within 2 months of the order being made by the court.

Garnishee Orders

A Garnishee Order is an order made by the court that allows a creditor to claim the judgment debtor’s money from a third party. The orders are served on the third party, not the judgment debtor. Therefore, the judgment debtor is usually unaware of the order until the third party starts paying money to the creditor.

In NSW there are two types of Garnishee Orders, a Garnishee Order for Debts, or a Garnishee Order for Wages/Salary. Motions need to be filed with the court for the court to make the orders.

A Garnishee Order for Debts is a court order that allows the creditor to recover the judgment debt from the judgment debtor’s bank account or from another party that owes the judgment debtor money, for example, rental inc​ome could be garnisheed from a real estate agent managing a property owned by the judgment debtor.

A Garnishee Order for Wages/Salary is a court order that allows the creditor to recover the judgment debt from the judgment debtor’s wages. The judgment debtor’s employer is ordered to pay some of the judgment debtor’s wages or salary to the creditor until the debt is paid in full. The judgment debtor is entitled to retain a protected amount of their wage (currently $587.50 per week). Any income received above that will be paid to the creditor by the employer.

Writ of Execution of Writ for the Levy of Property

A motion needs to be filed with the court to request the court makes orders for a Writ of Execution or Writ for the Levy of Property. This is an order to a sheriff to seize and sell at auction, property belonging to the judgment debtor. The funds obtained from the sale of the goods or property are used to pay the judgment debt owed to the creditor.

A creditor can apply for a Writ for the Levy of Property against​ personal property (not land) in the Small Claims Division of the Local Court. This writ authorises the sheriff to seize and sell the debtor’s personal property (excluding essential household items) to satisfy the debt.

For larger debts, a creditor can apply for a Writ for the Levy of Property against real property such as land and buildings.

A Writ for the Levy of Property is active for 12 months. A fee of $100.00 must be paid to the Sheriff for each attendance at a property. If the writ expires and the creditor still has not recovered all of the debt, it can apply for another writ.

Insolvency or Bankruptcy

If the judgment debtor is unable to pay the judgment debt, a creditor can initiate bankruptcy proceedings against an individual or insolvency proceedings against a company. This process involves the liquidation of the debtor’s assets by a trustee or liquidator to pay off the debts.

We will look at the options of insolvency or bankruptcy in more detail in our next article.

Conclusion

The process of enforcing a judgment debt in NSW involves navigating complex legal procedures and a creditor should always seek the advice of solicitors about the case that is specific to them. Solicitors will assess the matter and provide advice on the most effective and efficient method of enforcement based on the debtor’s financial circumstances and the nature of their assets. It’s also crucial for creditors to act promptly, as delays can affect the success of enforcement efforts. For detailed guidance and to ensure compliance with legal requirements please contact Paul Thorndike on 0429 008 247 or at paulthorndike@nswcreditlaw.com.au