ENFORCEMENT OPTIONS
Where a judgment has been obtained against the debtor but the debtor is still unwilling or unable to pay, our clients should consider taking further legal action to enforce payment of the debt.
Before commencing enforcement proceedings, here are some notes about issues that should be considered. These notes have been approved by our associated legal firm E C Legal who advise that the notes are provided to assist eCollect and E C Legal clients in determining the best course of action for you without having to engage the lawyers for legal advice before the commencement of proceedings. Lawyers from E C Legal are available to discuss your case personally. To obtain full and proper legal advice, you should consult a lawyer in person.
There are a number of enforcement options available. These are listed below. Whilst the names of the various processes change from state to state, it is expected that each of these processes to be available in each state. These notes are a generalisation of the processes available.
Warrant to Seize & Sell Real Personal Property
This is the most common method of enforcing judgment. It involves issuing a Warrant against the debtor and instructing an officer of the Court known as the Sheriff to attend at the premises of the debtor to seize goods belonging to the debtor and then sell those goods in satisfaction of the debt. The most commonly seized goods are motor vehicles.
If the debtor has personal property standing in the debtor's name then this procedure can be undertaken. However, our experience is that debtors are quite easily able to avoid handing over goods in their possession.
Warrant to Seize & Sell Real Estate
In the event that the debtor owns real estate, it is possible to make an application to the court for the sale of this real estate in satisfaction of the debt. Only the debtor's interest in the real estate may be taken to pay the debt. As such, if the debtor has little or no equity in the real property, then this may not be a viable enforcement option.
The issue with attempting to sell land in satisfaction of the debt is the amount of time involved in the process. Orders from lower courts need to registered in the Supreme Court which has the jurisdiction to order sale of land. Once the judgment is registered in the Supreme Court, the warrant can be issued.
If the debtor in this matter has real estate standing in the debtor's name then this procedure should be undertaken as it has a high probability of bringing a positive financial return.
Oral Examination of Judgment Debtor
This procedure is one which involves gathering of information only. It comprises of issuing a Summons for the debtor to appear in court and answer a series of questions about the debtor's financial position. The Registrar of the court interviews the debtor, completes a financial position summary and reports back to us. Lawyers and clients are usually able to attend and participate in the questioning process. The idea is that once the debtor's financial position is known, creditors will be in a better placed to decide which specific method or recovery is most suitable to pursue. The Summons for Oral Examination is a valuable tool because it is the first time in the legal process to date where the debtor must physically appear in Court. Up to this point, the debtor can simple ignore the process but if the debtor fails to appear for a Summons for Oral Examination then the court will usually direct the debtor be arrested. This usually provides incentive for an appearance which in turn often prompts action in relation to payment.
The Summons is a document prepared by lawyers and issued by the court. It states the details of the judgment debt and requires the attendance of the debtor at court at a particular time and day to be examined. The date for the examination will be approximately 8 weeks from the time the Summons is issued and the court venue will the venue closest to the address for service of the debtor. The Summons also requires the debtor or debtor company's director to produce all relevant financial documents for examination.
Once the Summons is issued it must be personally served on the debtor. We will organise this.
Attachment of Earnings' Garnishee Orders
Where the debtor's place of employment is known, this procedure enables an application to the court to be made on the creditor's behalf for an order that the debtor's employer deduct a certain amount of the debtor's earnings in order to pay the debt by way of instalments. These payments are deducted directly from the debtor's salary by the employer and sent to us.
Attachment of Debt
Where it is known that the debtor has an amount owing, it is possible to apply to the Court for an order that the person who owes the money to the debtor should pay it to the creditors rather than the debtor.
Bankruptcy
Bankruptcy is process where the control of the debtor's assets are taken away and placed in the hands of another person known as the Trustee. A number of restrictions are imposed on the debtor including the amount that is able to be retained from earnings, owning of property, overseas travel etc.
Because of the nature of the jurisdiction and the drastic consequences to the debtor, this procedure is very strictly controlled by the Federal Court and can be costly. It is only useful where the debtor has assets either in his own name or recoverable by a trustee that the debtor refuses to sell in order to pay your debt. It may also be effective where the debtor wishes to avoid the stigma and inconvenience of becoming bankrupt and as such the threat of bankruptcy forces the debtor to come up with the money to pay you.
Bankruptcy proceedings can only be taken against an individual.
For more information on bankruptcy, see http://www.itsa.gov.au/
Company Liquidation
Company liquidation is the corporate equivalent of issuing bankruptcy proceedings.
The procedure starts with a Creditors Statutory Demand which requests payment of the debt owed by the company with a specified period. If the debt is not paid, the company can be wound up.
If the company is trading and wishes to continue trading then liquidation can be an effective option.
Creditor considerations
Cost
As in all successful proceedings, the out of pocket expenses are recoverable on a successful action against the debtor. However, these expenses will be lost if no recovery occurs. Some enforcement proceedings such as Bankruptcy and Warrant for Seizure and Sale of Real Estate are expensive and therefore if the debt is small, it may not be worthwhile pursuing them.
Information about the Debtor
Information about the debtor's financial position is vital at the enforcement stage. For example, if you know that the debtor is employed, you may apply to attach his/her earnings. If the debtor has substantial personal assets or real assets it may be possible to seize and sell these assets. If the debtor operates a business it may have debtors of its own, in which case an attachment of debts application may be appropriate.
We strongly recommend that creditors find out as much as possible about the debtor's circumstances.
Information about other Creditors
If the debtor has other substantial creditors, it will be necessary to take into account the impact of this on the debtor's position. If for example there are other creditors taking recovery action against the debtor such as bankruptcy proceedings or winding up proceedings, it may not be worthwhile for you to take any action whatsoever as this will not benefit our client directly.
Starting the Enforcement Action
Talk to eCollect about the debt and once you have identified which type of enforcement action you think will work and eCollect will arrange for E C Legal to confirm the cost of the process directly with you.
Ref: CLIENT INFO SHEET - Enforcement options
Authorised by: James Woods
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Last Update: Thursday, 13 November 2008
