Just because you receive a court judgment in your favour doesn’t mean you will be paid. Sometimes, it can be equally as difficult to get a debtor to pay a judgment debt.
There are several different ways that you can enforce a judgment, depending on whether the judgment debtor (the person who has to pay) is a company, business or an individual.
An enforcement warrant is a document issued by the court which enables you (or a bailiff on your behalf) to take certain assets of the debtor to fulfil the judgment debt. There are several varieties of warrant that enable you to:
- redirect the debtor’s wages,
- redirect monies owed to the debtor,
- redirect money from the debtor’s financial institution, and
- seize and sell the debtor’s property.
Steps for obtaining an enforcement warrant
- Write a formal letter of demand to the debtor requesting payment of the judgment debt by a specific date.
- If the debt is not paid by the requested date, conduct research into the financial standing of the debtor so that you know what sort of enforcement will be the most effective. This may require you to apply for an enforcement hearing, where the debtor is required to present evidence of his or her financial situation to the court.
- Once you have an idea of the debtor’s financial situation, register your judgment with the Magistrate’s Court and then apply for an enforcement warrant. A bailiff may need to be paid to execute a seizure and sale warrant on your behalf.
A creditors petition is a document that can be filed by an unpaid creditor (someone who is owed a debt) to commence bankruptcy proceedings against a debtor who is a natural person. After the debtor is pronounced bankrupt, the creditor will be paid out of the bankrupt’s estate by the trustee. Depending on how large the bankrupt’s estate is compared with his or her debts, the creditors may only receive a proportion of what they are owed.
Steps for Bankrupting Debtor
- Conduct a search of the National Personal Insolvency Index database to make sure the debtor is not already bankrupt. If they are, you should take steps to ‘prove’ in the bankruptcy so you will be among the creditors that will be paid.
- Serve a Bankruptcy Notice on the debtor. If the debtor does not comply with a Bankruptcy Notice, they are deemed to commit an act of bankruptcy.
- File a Creditors Petition with the Federal Court. (A filing fee will be payable.) A hearing date will be scheduled by the court. If you are successful, the court will make a sequestration order, rendering the debtor bankrupt.
Applications to wind up a company
Applications to wind up a company work in much the same way as a Creditors Petition, but for companies. Where a company has failed to pay a judgment debt, a statutory demand may be served. Failing to comply with a statutory demand is deemed an act of insolvency enabling the creditor to apply to have the company wound up.
Steps for winding up a company
- Conduct a search with ASIC to determine whether the company is already being wound up or under receivership or voluntary administration. It is also a good idea to do some research to determine what assets the company holds. If the company has no equity or assets, you are unlikely to recover any money from the winding up proceedings.
- Serve a Statutory Demand on the debtor. If they fail to comply with the demand within the specified time, then they will be deemed to have committed an act of insolvency and may be wound up.
- File a Winding Up Application. If you are successful, the court will make a winding up order, appointing a liquidator to distribute the company’s assets and deregister it.
The above processes are quite complex and must be performed strictly in accordance with regulations. It is advisable to obtain legal advice if you are considering any of these enforcement methods.