If a Court has made a judgment against you and you fail to make payment to resolve your debt, the party you owe money to (the judgment creditor) may apply to the Court for a garnishee order to recover the money from you.
What is a garnishee order?
A garnishee order is made to a third party who either owes you money. For example; your employer or someone who holds money on your behalf, such as a bank or financial institution. The third-party, referred to as the garnishee, must pay the judgment creditor a lump sum or a portion until the judgment debt is satisfied.
If you are a judgment creditor, garnishee orders are helpful to obtain if contact has been made with the judgment debtor and they fail to take steps to resolve the debt.
Garnishee order for wages or salary
A garnishee order for wages or salary is issued on your employer to withhold a portion of your wages or salary until the judgment debt is satisfied. The garnishee must leave you with a ‘weekly compensation payment’, which is a minimum amount of your wage or salary you can live off. Currently, the weekly compensation payment in NSW is $527.40 (as of 1 October 2020), and this amount is adjusted in April and October of each year.
Payment is to be made by the garnishee to the judgment creditor within 14 days of when the wage or salary is due to be paid to the judgment debtor.
Garnishee order for debts
A garnishee order for debts can be issued on your bank, financial institution or a party who owes you money or holds money on your behalf, such as a tenant. This garnishee order is satisfied by a lump sum payment. The bank or financial institution is also required to leave you with the weekly compensation amount plus $20.
Payment is to be made by the garnishee to the judgment creditor within 14 days of the order’s service. If the garnishee is expecting debt to accrue or fall due more than 14 days after the order’s service, payment is to be made within 14 days of when the debt falls due to the judgment debtor. If the debt is expected to fall due after 28 days of service, the garnishee is required to inform the judgment creditor of when the debt is expected to accrue and the amount of the debt.
What to do if a garnishee order is made on your debt
If you have a judgment against you and a garnishee order is in place, there are several options to stop the order.
- Pay the debt in full – if you are able to find a way to make payment to satisfy the debt, the garnishee order will no longer be in force.
- Bankruptcy – if you declare bankruptcy, your unsecured debt is no longer payable, and related garnishee orders will stop; however, declaring bankruptcy has longer last effects and should be considered very carefully.
- Negotiate repayment – you could attempt to contact the judgment creditor or their solicitor and offer an alternative payment arrangement with them, such as a payment plan or reduced judgment sum.
- Apply for an instalment order – if you are in financial difficulty and the judgment creditor does not wish to negotiate or declines your offer, you may apply to the Court for an instalment order. It is at the Court’s discretion to make an instalment order, and an application will usually be refused if it will result in the debt taking too long to repay.
What happens if a garnishee does not comply with the order?
If an employer, bank, financial institution or other garnishee does not comply with the garnishee order, the Court may give judgment against them for the amount of the debt. This is why, if you have been served with a garnishee order, it is essential you comply with the order or seek legal advice if you require more information.
If you would like advice on garnishee orders or enforcement of judgments, please get in contact with our team today to discuss.
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***Assisted by; Madeline Furchtmann***