A garnishee order is a method of enforcing a court judgment, allowing the recovery of money from the judgment debtor. Therefore, if a party has had a judgment made in their favour, they will become the creditor and will be able to make an application to have the judgment debt recovered through third parties connected with the debtor. These third parties can either be the debtor’s employer or a financial institution with money on hold for them. Money owed will then be redirected to the creditor instead of the debtor.
How Do They Work?
Applications for garnishee orders vary in each State and Territory. The difference is predominantly in regard to the financial safeguards afforded to the debtors and the minimum amount of money that must remain for the debtor to live on.
In NSW, forms to apply for a garnishee order can be found on the Uniform Civil Procedure Rules Forms website. A creditor will only need to send a copy of a granted order to the garnishee (employer or financial institution) and does not need to notify the debtor.
A creditor can issue multiple garnishee orders to multiple pirates. Therefore, if a single garnishee order to one third party is insufficient in paying off the debt, another garnishee order can be ordered to a different party until the judgment debt is paid off.
Depending on the financial circumstances of the debtor and the creditor’s knowledge about these circumstances, there are two main types of garnishee orders that a creditor can apply for.
Types of Garnishee Orders
1. Garnishee Order for Wages or Salary
If the creditor knows who the debtor’s employer is, they can address a garnishee order to the employer. The employer will then be legally obligated to transfer the debtor’s wages to the creditor until the judgment debt is paid off. However, there are a few requirements that the employer must follow. The employer must reserve a minimum amount of $527.20 per week (as of October 2020) for the employer so that they can live off and this is known as the ‘weekly compensation amount’. Entitlements and leave loading are also to be included in the amount payable to the creditor and the employer can reserve $13 (as of October 2020) for themselves as an administration fee for each payment under the garnishee order. This administration fee will not count towards the judgment debt.
Instalments for Wages
A debtor can make an application to the court to reduce the amount that is transferred to pay off the judgment debt per week by the employer. The debtor will need to provide details of their income and outgoings and propose an amount that they can pay towards the debt each week. This then leaves the debtor with more money for them to take home, however, it will not reduce the overall amount due. The creditor can object to the instalment order and either seek to have the instalments rejected or increase the instalment amount.
2. Garnishee Order for Debts
Alternatively, if the creditor knows the debtor’s bank account details, they can address the garnishee order to their bank, financial institution, or other third parties that hold money on behalf of the debtor such as real estate agents. Third parties only transfer the debtor’s money if the debtor has a minimum amount of money to live on (weekly compensation). The bank or financial institution can also deduct an administration expense.
If a debtor receives Centrelink or other government benefits directed to their bank account, the creditor will not be able to retrieve this money. Garnishee orders do not apply to Centrelink benefits and this money in the debtor’s bank account will be protected. Only in exceptional circumstances can a creditor recover Centrelink payments or government benefits, therefore, legal advice is necessary shall they decide to take this route.
Information about the Debtor’s Finances
If the creditor does not have knowledge of the debtor’s financial circumstances, it may be difficult to determine which type of garnishee order to apply for. A creditor can issue the debtor with an examination notice to ascertain their financial status and determine which third parties hold a greater amount of money for the debtor to pay off their judgment debt. If this fails or the creditor provides insufficient information, the creditor can then issue an examination order which orders the debtor to attend court where they must provide information. Otherwise, the last resort will be to provide the debtor with a notice of motion arrest warrant for examination.
If the employer does not comply with the order, the creditor may make an application to have the judgment set against them instead of the debtor. Otherwise, the creditor can issue other garnishee orders to other third parties.
Garnishee orders are an effective method of retrieving money as it essentially removes the reliance upon the debtor to pay off the judgment debt and goes straight to their sources of income. If the amount of the judgment debt is small, it may be useful to issue a garnishee order for wages as this method slowly repays off the debt and can be in instalments. Otherwise, if a creditor is seeking a quick repayment, then a garnishee order for a debt will be better as banks and other institutions typically hold a greater amount of money for the debtor. If there is insufficient money in the debtor’s accounts or the garnishee fails to transfer the money to the creditor, the creditor can then make an application to have the garnishee pay the judgment debt instead of the debtor.
If you need assistance with a garnishee order, get in touch with us via the contact form or by calling 1300 337 997.