Garnishee Order: What is it and How Does it Work?

Author: Ian Aldridge, Progressive Legal

When it comes to enforcing a judgment debt, business owners in New South Wales hold a valuable tool at their disposal – the garnishee order. This straightforward legal mechanism allows you to reclaim owed funds directly from a debtor’s bank account, wages, or even from a third party.

Whether you’re seeking to recover a debt or facing a garnishee order yourself, this page provides essential insights and actionable steps to ensure you’re well-prepared for any scenario.

Enforcing a Judgment Debt

A Judgment debt is an order from a Court or Tribunal commanding the debtor to pay you a sum of money. In New South Wales, you have 12 years from the Judgment date to enforce your Judgment debt.

We recommend obtaining legal advice before commencing the process of enforcing a Judgment debt.

What is a Garnishee Order?

A garnishee order is a legal directive issued by a court that allows a creditor to collect a judgment debt from a debtor’s financial resources. It authorises the recovery of debt through specific means:

Debtor’s bank account(s)

The court order permits the creditor to withdraw funds directly from the debtor’s bank account(s). This is often one of the quickest ways to recover the owed amount, provided the debtor has sufficient funds in their account.

Debtor’s wages or salary

The court can instruct the debtor’s employer to deduct a portion of the debtor’s wages or salary and pay it to the creditor. This ensures a steady payment stream, making it easier for the creditor to recover the full debt over time.

Third-party debts

If someone else owes the debtor money, the court order can redirect those funds to the creditor. This can include money owed by clients, customers, or other entities who are in debt to the original debtor.

This order effectively allows creditors to collect outstanding debts by targeting the debtor’s financial resources or income.

Where do I start?

If you know the debtor’s bank account details, you may issue a Garnishee Order for Debts addressed to the debtor’s bank. This is a Court order that allows you to recover the Judgment debt directly from the debtor’s bank account.

Alternatively, if you know the debtor’s employer, you may issue a Garnishee Order for Wages or Salary. This is a Court order for the debtor’s employer to procure an amount of money from the debtor’s wage or salary and pay it to you until the Judgment debt is paid.

Issuing a garnishee order for debts

If you are aware of the debtor’s bank account details, issuing a garnishee order for debts allows you to recover the judgment debt directly from the debtor’s bank account. This court order compels the bank to withdraw the owed amount from the debtor’s account and transfer it to the creditor.

The bank must comply with this order by law, making it an efficient method of debt recovery when the debtor has sufficient funds available. It is crucial to ensure the accuracy of the debtor’s bank details to avoid delays or complications in the recovery process.

Steps to issue a garnishee order for debts

1. File an application with the court to issue a garnishee order directed at the debtor’s bank.

2. Once the court approves the order, serve it to the bank where the debtor holds their account.

3. The bank will review the order and freeze the necessary funds from the debtor’s account.

4. The bank will transfer the garnished amount to you, fulfilling the judgment debt.

Issuing a garnishee order for wages or salary

If you know the debtor’s employer, you can issue a garnishee order for wages or salary. This court order mandates the employer to deduct a specified portion from the debtor’s wages or salary and pay it directly to the creditor.

From 1 April 2024, the total amount deducted under one or more garnishee orders cannot reduce the net weekly wages or salary of the debtor to less than $587.50. This ensures the debtor retains a minimum amount for living expenses.

The deductions continue until the full judgment debt is satisfied. This method is particularly effective if the debtor has regular employment, ensuring a steady and predictable payment stream. Employers are legally required to comply with the garnishee order, and failure to do so can result in legal consequences.

Steps to issue a garnishee order for wages or salary

1. File an application with the court to issue a garnishee order directed at the debtor’s employer.

2. Once the court approves the order, serve it to the employer where the debtor works.

3. The employer will start deducting the specified amount from the debtor’s wages or salary as per the court order.

4. The employer will remit the deducted amount to you on a regular basis until the debt is fully paid.

What if I need more information about the debtor’s financial circumstances and assets?

During the Garnishee process, you may not be sure of which garnishee option would be appropriate in your situation, and/or require more information about the debtor’s financial circumstances. Obtaining information such as the debtor’s income, assets, debts, bank accounts, or other debts can be challenging, particularly if the debtor is not forthcoming with this information. 

In this situation, you can find out information about the debtor’s financials by issuing the debtor with an Examination Notice. The Examination Notice is posted to the debtor and requires them to provide you with this information.

If the debtor doesn’t respond sufficiently to the Examination Notice, you can issue an Examination Order. This orders the debtor to attend court, where you or your legal representative may ask them for information about their financial circumstances.

If the judgment debtor continually doesn’t attend court for this examination, the Court may issue the debtor with a notice saying that continuing to not attend can lead to their arrest. If the debtor doesn’t respond to this notice, you may then apply for a Notice of Motion Arrest Warrant for Examination, which is a warrant to be issued for the debtor’s arrest.

My garnishee order didn’t recover the full judgment debt, can I do it again?

You can issue a Garnishee Order multiple times on the same debtor. For example, if a Garnishee Order on the debtor’s bank account doesn’t recover the full Judgment debt at that time, you may choose to issue another Garnishee Order to the same bank again in the future.

Where can I find the forms?

Access the relevant forms here:

1. Form 69 – Notice of Motion – Garnishee Order;
2. ​Form 70 – Garnishee Orders for Debts;
3. Form 71 – Garnishee Orders for Wages or Salary;
4. Form 71B – Garnishee Orders for Rent.​

What do I do if a garnishee order is issued against me?

Being issued with a Garnishee Order can have serious financial consequences, so you need to act fast if this happens to you. In this situation, you may choose to either:

1. Pay the judgment debt in full

Settling the debt immediately can stop further legal actions and additional costs.

2. Negotiate with the judgment creditor

Communicate with the creditor to reach a mutually agreeable repayment plan. This can involve negotiating for a reduced lump-sum payment or an extended payment schedule.

3. Apply to the court to pay by instalments

If you are unable to pay the debt in full, you can apply to the court to pay the debt in instalments. The court will assess your financial situation and, if appropriate, allow you to repay the debt over a specified period.

4. Claim bankruptcy under the Bankruptcy Act 1966

As a last resort, if you are unable to repay the debt, you may consider filing for bankruptcy. This will have significant long-term financial and legal consequences, including the impact on your credit rating and potential loss of assets. It’s advisable to seek professional legal and financial advice before taking this step.

Key Takeaways

Garnishee orders are a strong tool for business owners in New South Wales to enforce judgment debts efficiently. As a business owner in NSW, understanding your rights and responsibilities when it comes to garnishee orders is essential for safeguarding your financial health and maintaining smooth operations.

Seeking professional legal advice is always a vital step when dealing with complex legal matters like garnishee orders. Progressive Legal is here to assist you in navigating these laws and finding optimal solutions tailored to your business’s unique circumstances.

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