Recovering Judgment Debts and Enforcing Monetary Court Orders
Business Debt Recovery Article #4
This is the fourth article in a four part series with information about business debt recovery processes and procedures in the Magistrates Court of Victoria. This article provides information about various options that are available to seek to recover judgment debts and to enforce Court Orders for payment of money. Articles with more detailed information on these recovery options will be available soon.
We have published earlier articles focusing on the letter of demand, commencing legal proceedings and entering default judgments. Once a default judgment is entered there are still more steps involved in the process of recovering the judgment debt.
The fact that a Court order is made that a defendant pay you money does not mean that the defendant or debtor will simply ‘pay up’. If the defendant does not pay after entry of the order the first step is usually a further letter of demand advising the debtor that, if the judgment debt is not paid within seven days, recovery action will be taken against the debtor.
The appropriate recovery action to take depends upon a number of factors. These include but are not limited whether the debtor is a company or an individual, along with any information available about the assets and liabilities of the debtor.
There are a number of different options by which to attempt to recovery a judgment debt. Those most commonly used in the CBL Debt Recovery Process are set out below. In a series of articles that will be published by CBL Business Lawyers related to Judgment Debt Recovery we will provide more detailed information on each of the below recovery options.
- Warrant to Seize Property
A judgment creditor may apply to the Magistrates Court for the issue of a Warrant to Seize property owned by the judgment debtor that is located within Victoria. Once the Warrant is issued by the Court it can then be sent to the Sheriff’s Office.
The Sheriff will then attend at the debtor’s address set out in the Warrant. If the debtor does not pay the amount owed when demanded by the Sheriff the Sheriff may seize assets to satisfy the debt.
There are certain restrictions on personal and business assets that can be seized by the Sheriff. In addition, if the judgment debtor owns land (also known as ‘real property’) the Magistrates Court is unable to issue a Warrant to seize the land. Instead, the judgment creditor must ‘uplift’ the Magistrates Court Order to the County Court or to the Supreme Court and issue what is known as a Warrant of Seizure and Sale. This Warrant is then able to direct the Sheriff to take steps towards selling the land.
Any details that can be provided by a client regarding assets owned by a debtor can assist the CBL Business Debt Recovery team in determining whether issuing a Warrant is the appropriate in a particular case. We can also undertake searches to ascertain whether a debtor owns any land that may be available for seizure and sale.
- Attachment of Debts Order (or Garnishee Order over a Debt)
If you are aware that debtor is owed money from another person or company, or any third party entity, as a judgment creditor application can be made for an attachment of that debt, which is also known as a garnishee order over the debt.
This means that upon the Magistrates Court granting the application and the order for attachment of the debt then being served on the person or entity that owes money to the judgment debtor (that person also being known as the ‘garnishee’), the garnishee will be required to pay the debt to the judgment creditor instead of the judgment debtor.
Garnishing a debt is a useful option to choose in the debt recovery process if a debtor has limited funds but is owed money by another person.
- Attachment of Earnings Order (or Garnishee Order over Wages)
This is similar to an order for attachment of the debt, except it relates to the judgment debtor’s wages. If the judgment debtor is employed then the judgment creditor may apply for an order for the attachment of their earnings, also known as a garnishee order over their wages.
Once the Magistrates Court grants the application and the attachment of earnings order is served on the employer, the employer is required to deduct installments from the debtor’s wages and instead pay those amounts to the judgment creditor. The amount of each installment will depend upon the wages that would otherwise be earned by the judgment debtor and will also take into account the debtor’s financial circumstances and reasonable living expenses.
A garnishee order over wages is often recommended for business debt recovery if the debtor earns a reasonable wage. It ensures that the garnished amount is paid directly.
- Winding Up Proceedings
If the judgment debtor is a company then you may wish to consider winding up proceedings. These proceedings are not strictly a part of the debt recovery process, but they often do result in the judgment debtor making payment.
The first step of the process is usually to serve on the debtor a creditor’s statutory demand for payment of debt. The debt needs to be at least $2,000.00. If the debt is based upon a Court Order then the Order will be attached to the statutory demand. Even if there is no judgment debt then a statutory demand can still be served. However, in those circumstances the creditor will need to swear an affidavit stating that there is no genuine dispute regarding the existence or amount of the debt.
The creditor’s statutory demand may prompt the debtor to make payment. If the debtor does not pay, or enter into satisfactory arrangements for payment, within 21 days after service of the statutory demand then the creditor may commence winding up proceedings in the Supreme Court, Federal Court or Federal Magistrates Court. This is unless the debtor has made any application to set aside the statutory demand. If the debtor does not pay during the course of the winding up proceedings, an order will usually be made that the debtor company be placed into liquidation.
If an application is made to set aside the statutory demand, or if the winding up proceedings are opposed, the CBL business litigation & disputes team can assist. CBL also provides legal agency services to other law firms in relation to winding up proceedings.
- Bankruptcy Proceedings
If the judgment debtor is an individual bankruptcy proceedings are an option. In some respects these proceedings are similar to winding up proceedings. Just like winding up proceedings, bankruptcy proceedings are not strictly a part of the debt recovery process, but again they do often do result in the judgment debtor making payment.
The first step of the process is usually to issue the bankruptcy notice and to then serve it on the debtor. The debt needs to be at least $5,000.00 and must be based on a judgment debt. The bankruptcy notice is issued by application made to the Insolvency and Trustee Service of Australia. Once issued the bankruptcy notice can be served. A bankruptcy notice is usually served personally on an individual unless an order for substituted service is obtained.
The service of the bankruptcy notice may prompt the debtor to make payment. The period within which the debtor must pay, or enter into satisfactory arrangements for payment, is 30 days after service. If they do not do so within this period then, unless any application is made to set aside the bankruptcy notice, the creditor may commence bankruptcy proceedings in either the Federal Court or the Federal Magistrates Court.
If the debtor does not pay during the course of bankruptcy proceedings a bankruptcy order (also known as a sequestration order) will usually be made against the debtor.
If a debtor does make an an application to set aside a bankruptcy notice, or if bankruptcy proceedings are opposed, the CBL business litigation & disputes team can assist. Legal agency services are also provided by CBL to other law firms in relation to bankruptcy proceedings.
The appropriate avenue to attempt to recover a judgment debt as a part of the debt recovery process will depend upon all facts and circumstances relevant to the debtor. There is more detailed information on the above recovery options in our Judgment Debt Recovery article series, which will include articles on the warrant to seize property, warrant of seizure and sale, attachment of debts, attachment of earnings and garnishee orders, winding up proceedings and bankruptcy proceedings.
The pages of this site relevant to this article can be found here:
The other articles now published in this series include:
- The Letter of Demand - CBL Business Debt Recovery Article # 1
- Commencing Legal Proceedings – CBL Business Debt Recovery Article # 2
- Entering Default Judgments - CBL Business Debt Recovery Article #3
Please note that the facts and circumstances relevant to every client are different. The above article should not be relied upon as legal advice. Article by Nicholas Corr published 15.6.13. To be notified of new articles: