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Often times the defendant (the judgement debtor) in recovery proceedings does not have sufficient money to satisfy the judgement debt. As a result, it can be very difficult and frustrating for the plaintiff (the judgement creditor) to receive money to satisfy the debt that the judgement debtor owes them. One way in which a judgement creditor can satisfy their debt is by pursuing third parties who owe the judgement debtor money by obtaining a garnishee order.
What is a garnishee order?
A garnishee order is a court order that compels a third party (the garnishee) who owes money to the judgement debtor to pay the money directly to the judgement creditor. As such, it is essential that there is a creditor-debtor relationship between the judgement debtor and the garnishee.
Information about the judgement debtor’s financial circumstances can be obtained by serving an examination notice on the judgement debtor under rule 38.1(1) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)
Garnishee orders are often used to recover money from the judgement debtor’s bank account and their wages or salary.
How to apply for a garnishee order?
To apply for a garnishee order, the judgement creditor must file a notice of motion for the order under rule 39.34(1) of the UCPR. The notice of motion must be accompanied by an affidavit in support, which is sworn not more than 14 days after the date of filing pursuant to rule 39.35(1) of the UCPR. In accordance with rule 39.36(2), the motion must also specify the amount of the judgement debt that remains outstanding.
Are there any restrictions on the Court’s ability to grant a garnishee order?
Under rule 39.39A(1) of the UCPR, a garnishee order will not be made where the amount of the judgement debt to be paid is less than the prescribed minimum account balance plus twenty dollars ($20). The prescribed minimum account balance (PMAB) refers to the minimum amount of funds that the garnishee must be able to retain in their bank account. Section 118A of the Civil Procedure Act 2005 (NSW) (CPA) provides that the current PMAB is four-hundred and forty-seven dollars and seventy cents ($474.70).
When does a garnishee order take effect and when must the garnishee make payment?
Pursuant to rule 39.36(2), a garnishee order takes effect when it is served on the garnishee.
Furthermore, under section 118 of the CPA, payment of a debt that is the subject of a garnishee order must generally be made within 14 days of the order being served on the garnishee.
How can the judgement debtor respond to a garnishee order issued against them?
Once a garnishee order is issued, the judgement debtor has the following options:
- They can pay the judgement debt in full;
- They enter into a repayment plan with the judgement creditor;
- They can apply for an instalment order from the court. An instalment order is a court order that allows the judgement debtor to pay the judgement debt in specific instalments until the judgement debt is paid off in full.; and
- They can present a debtor’s petition and subsequently become bankrupt. During bankruptcy, the judgement’s debtors unsecured creditors, including the judgement creditor, will be prevented from seeking the payment of their debt. However, it is important to note that becoming bankrupt has a profound impact on a person’s life, as such a judgement debtor is unlikely to use this option to respond to a garnishee order being issued against them.
Garnishee orders can be an effective way to enforce a judgement entered in a party’s favour. By allowing the judgement creditor to pursue payment of the judgement debt from third parties, garnishee orders provide judgement creditors with recourse in circumstances where the judgement debtor has no money.
However, it is important to note that for the order to achieve its purpose, the judgement creditor must have knowledge of the judgement debtor’s financial circumstances and the judgement debtor must have money or assets that can be ‘garnished.’