A garnishee order allows a creditor to collect money from his/her debtor using a third party. This third party holds money or assets on behalf of the debtor such as banks, employers, or government agencies. The third party is known as a garnishee. Garnishees are legally required to pay the creditor a specified amount of money from the debtor’s account. The following options can stop a garnishee order:
1. Fully paid debt – Debtors should find a way to pay their debts in full
2. Bankruptcy – Creditors can no longer collect debts if the debtor files for bankruptcy
3. Negotiate repayment – Debtors have the option to negotiate with creditors on alternative payment methods. Some creditors may choose this option and give more time for the debtor to pay their debt.
4. Instalment order – Debtors may apply for an instalment order if they are having financial constraints due to the debt. However, courts may reject this application if:
- It will take too long for the debtor to pay the judgment debt on the schedule they proposed
- The judgment debtor cannot afford to pay the amount they proposed
It is crucial to pay debts because failing to do so may have legal repercussions. This may include the government seizing the debtor’s assets and the debtor receiving a lawsuit from the creditor. Unpaid debts can also have a detrimental effect on a person’s credit score and future ability to get credit. In general, paying debts is regarded as a financial and legal obligation.
How Do Garnishee Orders Work?
1. Taking Debt From the Debtor’s Salary/Wage
These orders are most typically obtained for wages or salaries. A debtor’s employer is given notice of this order. It is not necessary to inform the debtor whose wages are being garnished. A wage garnishee order is in effect until the money owed is paid in full or the court vacates the order. The employer must leave the debtor enough money to cover living expenses.
The term “weekly compensation amount” refers to this sum. This amount is also adjusted twice a year in the months of October and April. As of October 2022, $550.80 per week is the current weekly salary figure that is deducted from the debtor’s salary/wage. Employers are also allowed to deduct a further $13.00 for administration expenses.
2. Recovering Debt From a Bank or Financial Institution
The court may also issue a garnishee order to take money from a debtor’s bank account to pay off the debt. This sort of order typically instructs the garnishee to pay the outstanding amount in a single lump sum. The bank typically places a freeze on the account while it processes the garnishee order.
This prevents the debtor from accessing their account for two or three working days. In this situation, the garnishee may also deduct $13 for processing and administration costs. Centrelink payments in the debtor’s bank account may be partially or entirely exempt from garnishee orders. However, this will depend on the debtor’s circumstances.
3. Contacting Third-party Debtors
Any third parties that owe money to the debtor may be subject to a garnishee order for debt. This order is typically issued for a one-time payment rather than regular instalments, especially if the garnishee is a bank or financial institution. Third-party debtors may be tenants, contractors, or any other entity that owes money to the debtor.
Australian Tax Office (ATO) Garnishee Notices
ATO garnishee notices operate in a similar manner to court-ordered garnishee orders. Lodging this notice requires a third party, such as an employer or bank, to pay money they owe to a debtor directly to the ATO. In fact, the Tax Administration Act of 1953 gives the ATO the authority to serve such an order. The Tax Administration Act gives the ATO the freedom to simply bypass the courts using a written notice.
What if the Debtor Is Going Through Financial Difficulties?
The State Debt Recovery Office (SDRO) for NSW may sanction partial or whole refunds of the money that the creditor has taken to debtors who have financial hardships. This independent government agency is in charge of collecting outstanding fines and penalties as well as enforcing fine and penalty notices. Debtors may have critical health issues or other mitigating circumstances that cause their financial hardship. However, the debtor must provide proof of their adversity.
At some point, creditors in the garnishee order process will have to gain information about their debtor’s financial circumstances. This includes information such as the debtor’s income, assets, other debts, and accounts in financial institutions. Debtors may hide information from their creditors to escape their debt. However, there is a way for creditors to gain this information easily.
An examination notice is a legal document that requests information and supporting documentation regarding a person’s sources of income, assets, and other debts. Creditors may issue an examination order if debtors refuse to comply with the examination notice. If this is the case, the debtor is required to appear in court.
The creditor’s lawyer or solicitor may question the debtor regarding their financial situation. Debtors who refuse to appear in court and comply with the examination order could be arrested. Creditors may submit an application for a Notice of Motion Arrest Warrant for Examination if this happens. This is a type of warrant issued for the debtor’s arrest if they don’t comply with the examination order.
Garnishee Order For Child Support
Garnishee orders can be used to collect child support in Australia. Child support is a type of financial support necessary for a child’s upbringing. A garnishee order may be used to deduct a specific amount of money from a debtor’s wages/bank account. The court may serve a garnishing order on the paying person’s employer. Based on the order, the employer will then deduct necessary expenses and pay them to Services Australia.
Importance of Seeking Independent Legal Advice
It is important to seek legal advice about the garnishee order process since financial matters can escalate and become serious legal matters. Lawyers are knowledgeable about various financial-related orders, and their legal basis for them. A garnishee order can have a significant impact on a debtor’s assets, such as freezing bank accounts and taking money from their salary.
JB Solicitors can aid both creditors and debtors who are going through legal matters regarding debts. We can advise creditors on the steps they can take and the likelihood of success in retrieving debts. Our team can also help debtors find the best way to pay their debts, especially if they have financial hardships. We always protect the rights and interests of both creditors and debtors.
Contact us today to prevent your financial matters from escalating to courts.