Debt Collection
7. Enforcing the Judgment
Firm / Chambers:
Last updated: 17 Jul 2015
- Once a judgment has been obtained a decision will need to be made as to the appropriate enforcement proceedings. To some degree this decision will be dictated by three factors:
- the size of the debt;
- whether the debtor is a natural person or a company; and
- how much money you want to spend in judgment enforcement proceedings.
- For debts under around $5000 enforcement proceedings are usually issued in the Magistrate’s Court or Local Court depending on your state or territory.
- Where the debt is over $5000 enforcement proceedings generally use bankruptcy or corporate laws depending on the nature of the debtor.
- The costs of the enforcement process will also have some bearing on which enforcement process is used. Bankruptcy in the case of natural persons and winding up in the case of companies are fairly expensive processes that may not be commercially viable for you or your business.
- An examination hearing is a process whereby a debtor must go to court and be questioned about their capacity and means to pay the judgment debt.
- These sorts of processes are generally only issued with respect to Local Court or Magistrate’s Court actions and are issued by filing the appropriate court form at the registry nearest to where the debtor lives or carries on business.
- If the debtor attends the examination hearing their financial affairs are examined. If the court finds that the debtor has the means to pay then the court will make an order for the payment of the judgment debt. Such orders are generally for payment by way of instalments.
- If a debtor does not turn up to an examination a warrant may be ordered for their arrest so the police can force them to attend.
- Remember that if an instalment order is made a further follow-up process cannot be issued until the debtor is in default by two instalments.
- You will need to issue a summons for one of the company’s directors to go to court if you successfully obtain a judgment debt against a company. The director will have to attend court and answer questions about the company’s financial circumstances.
- The court may issue a warrant of arrest to bring a director to court if they do not turn up for the examination.
- The court may order the company to repay the debt but will not make an order personally against the director.
- Where the court orders a warrant of arrest the debtor will be arrested, conveyed to the court and then examined regarding their ability to repay the judgment debt. An instalment order usually eventuates.
- If a debtor has been ordered to make repayments and is then brought to court for an examination hearing they will have to explain why they did not make repayments in accordance with the order. If the court decides that their reasons are not satisfactory then it may find that the debtor is in ‘contempt of court’ and send them to jail. The punishment is for failing to obey the court’s order and not for failing to pay the debt.
- A debtor must be in default of two or more instalments before the court will consider an order for imprisonment.
- The debt still exists while the debtor is in prison. Going to jail does not delete the debt. The debtor will still have to pay it after they are released.
- The imprisonment order will be for a certain number of days in accordance with the laws of the relevant state or territory.
- A ‘court bailiff’ or ‘court sheriff’ (the title differs between states and territories) can execute a warrant of arrest. Before executing the arrest warrant they will usually give the debtor the opportunity to repay the amount that is due.
- This process is very effective with smaller debts as debtors will almost always come up with the money rather than go to jail.
- It may take a month or more before the arrest warrant can be executed so do not expect this to be a quick solution.
- As an alternative or in addition to an arrest warrant the court may issue a ‘writ of levy of property’ or ‘warrant of sale.’ Generally there is a warrant of sale against goods or a warrant of sale against real property or land. The precise terminology differs between states and territories but essentially means the same thing.
- The sheriff or bailiff will go to the address that the creditor has provided so it is important that you get the address right.
- If you have a warrant of sale of goods the debtor will need to give the sheriff or court bailiff some of their personal property which can be sold at auction or show the officer that they don’t have any property of value. The proceeds of the sale will be used to pay the debt and any costs which the creditor is entitled to claim.
- There are certain types of personal property that cannot be seized by a court bailiff or sheriff. These restrictions may differ from state to state. Generally they cannot seize items up to a specified value such as:
- clothing;
- furniture;
- household goods;
- trade tools
- cars; or
- bikes.
- There are other types of items that cannot be seized by a court bailiff or sheriff. Such as items that have been:
- hired;
- leased; or
- are subject to a bill of sale.
- These restrictions or limitations on what can be seized often result in the warrant being returned to court stating ‘nil effects’. This means the court bailiff or sheriff was not able to seize any property.
- For a warrant of sale of real property or land the court bailiff or sheriff has the power to seize and sell the debtor’s real property or land.
- This can usually be done after a warrant of sale against goods is returned ‘nil effects’ or after a special application to the court.
- If the debtor cannot find some way to pay their debt then their property will be put up for auction. The costs of the auction must be paid by the creditor. However they will be able to claim them back from the proceeds of the sale along with the judgement debt.
- Another option is for the court to register the debt as a charge which prevents the debtor’s property or a debtor company’s assets being dealt with until the debt is paid. This gives the creditor security like a mortgage so that their debt will get priority if the property is sold.
- The court prefers that other enforcement processes are used before taking this action.
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