With a rise in debt recovery action amidst increased financial distress for both individuals and businesses in 2023, it is an important time to revisit the various ways in which payment of a judgment debt can be enforced.
Firstly, what is a Judgment Debt?
A judgment debt arises when a court enters a judgment, or order, against a person or entity (known as the judgment debtor) to pay a specific sum of money to another party (known as the judgment creditor).
Tip: a judgment can be enforced for a period of 12-years.
What are the methods of enforcement of a judgment?
Judgment creditors in New South Wales may enforce a judgment in the following ways.
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Examination Notice and Order
If little is known about a judgment debtor’s financial affairs, you may wish to explore the examination process.
In the first instance, you must issue what is called an examination notice. An examination notice requires a judgment debtor to disclose to you their assets and liabilities, among other things, within 28 days of receipt.
If a judgement debtor fails to comply with an examination notice you may apply to the court for an examination order. An examination order summons a judgment debtor to court to attend a hearing where they will be required to answer questions and provide documentation as to their financial affairs.
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Writ for the Levy of Property
If you are aware that a judgment debtor owns either personal property or real property you may apply to the court for the sheriff to seize and sell the judgment debtor’s property.
A writ for the levy of property lasts for a period of 12 months after being issued; however, you can apply to the court for an extension.
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Garnishee Order
If you are aware that a judgment debtor holds a bank account(s), earns a wage or salary or is owed money themself, you may apply to the court for an order to have money automatically deducted from the judgment debtor’s bank account(s), wages or salary and paid to you, or seek payment of the judgment debt from anyone else you can determine owes the judgment debtor money.
Tip: a garnishee order for wages or salary cannot reduce the debtor’s weekly net income below what is referred to as the ‘protected amount’. The current protected amount $563.40. This amount is adjusted annually in April and October.
Tip: certain payments a judgment debtor receives may be protected from a garnishee order, such as Centrelink payments.
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Charging Order
A charging order is available to a judgment creditor who obtains judgment in the District or Supreme Courts of NSW.
This order grants the creditor a security interest in one or more of the debtor’s assets for the amount of the debt owed.
It also prevents the judgment debtor from disposing of or transferring rights in the specified asset.
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Bankruptcy Proceedings
Where the judgment debt is greater than the statutory minimum and the judgment debtor is an individual, you may wish to serve a bankruptcy notice.
Tip: the current statutory minimum for a bankruptcy notice is $10,000.00.
A bankruptcy notice must be personally served on a judgment debtor. Once served, the judgment debtor has 21 days to make payment, or otherwise enter into a suitable repayment arrangement.
If the judgment debtor fails to comply with the bankruptcy notice then they have committed what is referred to as an ‘act of bankruptcy’, and you are able to present a creditor’s petition seeking a sequestration order which effectively makes them bankrupt. A trustee in bankruptcy is then appointed to investigate the debtor’s financial affairs for the benefit of creditors.
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Insolvency Proceedings
Where the judgment debt is greater than the statutory minimum and the judgment debtor is a company, you may wish to serve a statutory demand.
Tip: the current statutory minimum for a statutory demand is $4,000.00.
Upon issuing a statutory demand by post to the company’s registered office, the company will have 21 days to address the demand, or alternatively seek to have the demand set aside. If the company fails to address the demand, the company is presumed insolvent, and you may file an application in the Supreme Court of NSW or the Federal Court of Australia to wind up the company.
If a company is wound up, then a liquidator is appointed and takes control of the company. The liquidator investigates the financial affairs of the company for the benefit of creditors.
Taking prompt action once a court grants a judgment debt in your favour can improve your chances of successfully recovery.
If you need help with enforcing a debt in New South Wales, or if you are being pursued for the recovery of a debt, contact Hunt & Hunt’s specialist debt recovery team on (02) 9391 3000.
Article by Matt Gauci, Partner, Jessica Egger, Senior Associate and Dallas Torresan, Paralegal
