Recovering unpaid debts can be a tricky task, but luckily, creditors have a valuable tool at their disposal which can often take debtors by surprise. Enter – Garnishee orders.
A garnishee order is a court order that allows a creditor to circumvent any dealings with the debtor to recover monies, and instead recover debts owed via a third party.
What do I need to do before I can apply for a garnishee order?
To be able to apply for a garnishee order from the court, a creditor must first have a Judgment Debt order from a court or tribunal. The most common way to obtain a Judgment Debt is to commence proceedings by way of statement of claim in a court of competent jurisdiction (which will depend on your claim type and value).
Whilst garnishee orders can be issued with little information on a debtor, it is advantageous to obtain bank account details at the outset of any contractual dealings with an individual or company, such as at the time a credit application is entered into. It is also prudent to keep records of any banks and bank accounts payments are made from by the debtor throughout the course of your relationship. Where possible, it is also recommended to keep on file up-to-date details of employment for the debtor, so that if the need arises to enforce a Judgment Debt, the creditor is armed with a suite of information that can expedite the enforcement process.
Types of garnishee orders
Recovering debt from wages and salaries
A garnishee order can be an effective tool in recovering monies owing directly from a debtor’s wages and salaries. A creditor will serve an order on the debtor’s employer, who will then garnish the debtor’s wages by instalments until the entire debt has been repaid.
Recovering debt from bank accounts
If you know a debtor has sufficient funds in a bank account to pay off the Judgment Debt, recovering monies owing from a debtor’s bank accounts is the fastest and most satisfying way for a creditor to get repaid. Not only does this option take debtors by surprise, but where a garnishee order for debts is issued to a bank or financial institution, the garnishee order is satisfied by one lump sum payment.
A creditor is permitted to issue multiple garnishee orders to a bank or financial institution until the debt is cleared in full.
Recovering debt from people who owe money to the debtor
While less common, this garnishee route is particularly useful where a creditor is aware of a third party that owes money to the debtor, such as a contractor, customer, tenant or purchaser of a property who holds the proceeds of sale that ought to be paid to the debtor. Similarly to a garnishee order issued to a bank or financial institution, the garnishee order will be for a lump sum payment of money.
What happens if a garnishee order is not complied with?
Should a garnishee fail to comply, a creditor can apply to the court to make the garnishee liable for the amount of money to be recovered, by filing notice of motion for judgment against the garnishee for the amount of the debt, wage or salary.
Key takeaways
Don’t overlook the humble garnishee order as a mechanism to achieve prompt and cost-effective recoveries of debts owing.
Garnishee orders are one of the most valuable tools available to a creditor when seeking to enforce Judgment Debts. A prudent creditor can equip themselves with the necessary information to expedite the garnishee process at the start of entering into a relationship with a debtor, simply by taking appropriate due diligence steps and keeping a record of financial and employment details of a debtor.