Debt Recovery in the Local Court of New South Wales – Part 1 of 4

Part 1 – Examination:

Once a judgment has been obtained in the Local Court, there are several processes which can assist in recovering the debt. This four part series will take you through each enforcement process available to judgment creditors in recovering their debts.

The examination process is a cost effective method of understanding a debtor’s financial situation and can assist creditors and debtors in negotiating an instalment plan. The method is set out as follows:

Examination Notice:

An examination notice is posted to a debtor and includes a financial statement which they are required to complete and return to the creditor. The information to be provided to the creditor includes information such as the debtor’s employment status, any dependants they may have, any assets they have and so on. The debtor can also make an offer to pay the debt by instalments within the financial statement.

The debtor then has 28 days to complete the form and return it to the creditor. If the debtor does not complete and return the notice within 28 days, the creditor can make an application to the Court to issue an examination order.

Examination Order:

An examination order is a Court order which requires the debtor to attend Court to be examined in relation to their financial circumstances before a Registrar. This is called an examination hearing. The creditor is required to personally serve the debtor with the examination order at least 14 days before the examination hearing is listed. The creditor or creditor’s representative is also required to attend, and the Registrar will help facilitate a payment plan with the parties based on the information provided by the debtor.

Arrest Warrant:

In circumstances where the debtor fails to appear at the examination hearing, the creditor can seek leave from the Court to issue an arrest warrant for examination and seek their costs for appearing at the hearing. If service of the examination order is not affected by the date of the examination hearing, the arrest warrant cannot be issued.

Once 14 days has passed from the date of the examination hearing, and the debtor has not responded, the creditor can make an application for an arrest warrant to be issued. Following this, the Sheriff will attend the debtor’s property in an attempt to arrest them and bring them to Court to be examined in respect of their financial circumstances.

Pros:

1. If the debtor cooperates, the information from the financial statement can assist the parties to come to an amicable agreement with respect to payment of the debt.
2. The information provided in the financial statement assists the creditor in determining their duties as a creditor, and what steps they can take in terms of future enforcement depending on the debtor’s financial circumstances. For instance, if a debtor produces documents which show they have dependants and are earning an amount which would not allow them to pay more than $200 per week, the creditor would be required not to place the debtor under financial strain.
3. The information provided in the financial statement can also assist the creditor in terms of carrying out future enforcement. For instance, if the financial statement is completed by the debtor, and then they become unresponsive, the creditor might be able to make an application for a garnishee order using the bank or employment details which were initially provided by the debtor within the financial statement.

Cons:

1. Unfortunately, as the Sheriff only attends the property during 8am – 6pm from Monday to Friday, when most debtors are at work, it is difficult to actually execute the arrest.
2. The Sheriff has limited power in terms of the force they can use to enter and arrest debtors as they cannot force entry.
3. The longer the debtor avoids the Sheriff and attending the examination hearing, the more costs are incurred by the creditor.
4. If the debtor is not served with the examination order, the creditor is limited in how many times they can adjourn the hearing until they effect service. Generally, after 2-3 adjournments, the examination order will be struck out by the Registrar, and the creditor will be required to issue a new examination notice and start the process again.