When the Bank Won’t Bite: Why Your Garnishee Order Failed and What to Do Next

Debt Recovery

When a Garnishee Order Fails: Next Steps for Creditors

Securing a court judgment in your favour is a significant milestone, but it is only half the battle. The ultimate goal is to recover the judgment debt, and a garnishee order is one of the most common and effective tools for achieving this. However, what happens when the order is served, but no funds are forthcoming? This situation is frustratingly common and can leave creditors feeling powerless.

A garnishee order that returns empty-handed due to "insufficient funds" is not the end of the road. It is a signal to pivot your strategy and escalate your enforcement efforts. This guide provides a clear framework for creditors and finance managers, outlining the next practical steps to take when a garnishee order fails, ensuring you can continue to pursue and recover a judgment debt effectively.

Understanding How a Garnishee Order Works

Before exploring next steps, it is essential to understand the mechanism of a garnishee order. It is a court order directed at a third party (the "garnishee") who owes money to, or is holding money for, the judgment debtor.

The most common types of garnishee orders

1. Garnishee Order for Debts: This is typically served on a financial institution, like a bank. It attaches to any funds held in the judgment debtor’s bank account at the moment of service, up to the value of the judgment debt. It is a one-time "snapshot" order.

   
   

2. Garnishee Order for Wages or Salary: This is served on an employer. It attaches to the judgment debtor's future wages or salary, requiring the employer to deduct a specified amount each pay cycle until the debt is paid.

The order legally compels the garnishee to redirect the funds to you, the judgment creditor, instead of paying the debtor.

Common Reasons a Garnishee Order Yields No Funds

When a garnishee order on a bank account fails, the most frequent reason provided by the bank is "insufficient funds." This can occur for several reasons, and understanding why is key to planning your next move.

• Poor Timing: The order may have been served on a day when the debtor's account balance was low or empty. For example, the day before their salary is deposited.

  
  

• The Debtor Was Alerted: The debtor may have become aware of the impending order and moved their funds to another account or institution.

  
  

• Incorrect Account Type: The funds might be held in a joint account with a specific structure, or in an account type that is not attachable under the terms of the order.

  
  

• The Account is Overdrawn: There are simply no positive funds available to be captured by the order.

For a garnishee order on wages, failure might occur if the debtor has recently changed jobs or their pay is below the statutory weekly compensation amount, leaving no disposable income to garnish.

A Step-by-Step Escalation Path for Debt Recovery

When your initial garnishee order fails, you must proceed with a structured and strategic approach. Here are the logical next enforcement options available to a judgment creditor.

Step 1: Immediate Troubleshooting and Re-assessment

Before launching into more complex actions, conduct a quick review.

• Can you serve the order again? If you suspect the failure was simply a matter of bad timing (e.g., you missed the debtor's pay-day), it can be cost-effective to serve a new garnishee order on the bank a day or two after you expect funds to be deposited.

  
  

• Do you know of another bank or employer? If you have details of an alternate bank account or a new employer, serving a fresh garnishee order there is a logical next step.

Step 2: Gather More Information – The Examination Notice

If you lack information about the debtor’s financial circumstances, your next move is to seek it. An Examination Notice (sometimes called an information subpoena) is a powerful tool that legally compels the judgment debtor to disclose details about their assets, liabilities, income, and expenses.

The debtor must provide answers to set questions and produce financial documents, such as bank statements, pay slips, and tax returns. Failure to comply can result in the debtor being brought before the court for a public examination. The information gathered here is invaluable for planning more targeted enforcement.

Step 3: The Examination Hearing

If the debtor fails to comply with the Examination Notice or provides unsatisfactory answers, you can have them summoned to court for an Examination Hearing. Here, the debtor must answer questions about their finances under oath, in person, before a judicial officer. This process not only provides critical information but also places significant pressure on the debtor to resolve the judgment debt.

Step 4: Pursue Alternative Enforcement Options

Armed with financial information from the examination process, you can now choose the most appropriate and potent enforcement option.

• Writ of Levy of Property: If the examination reveals the debtor owns valuable assets like real estate, vehicles, or expensive equipment, you can issue a Writ. This authorises the Sheriff of NSW to attend the debtor's property, seize assets, and sell them at public auction to satisfy the debt.

  
  

• Bankruptcy or Winding-Up Proceedings: For significant debts, this is one of the most powerful enforcement options.

  
  

  • For an Individual Debtor: You can serve a Bankruptcy Notice. If the debtor fails to pay the judgment debt within 21 days, they commit an "act of bankruptcy," entitling you to file a creditor’s petition in the Federal Court to have them declared bankrupt.

    
    

  • For a Company Debtor: You can serve a Statutory Demand. If the company fails to pay within 21 days, it is presumed insolvent, allowing you to apply to the Supreme Court to have it wound up and a liquidator appointed.

The threat of bankruptcy or winding up is often enough to compel a debtor to pay.

Take Control with Expert Debt Recovery Lawyers

A failed garnishee order is not a dead end; it is a crossroads that demands a more strategic path forward. By methodically gathering information and selecting the right escalation tool, you can significantly increase your chances of recovering a judgment debt.

Navigating the complexities of enforcement requires experience and precision. Dormer Stanhope Lawyers specialises in guiding creditors through every stage of this process. Our debt recovery lawyers in Sydney can help you move beyond a failed garnishee order and implement powerful strategies to enforce your judgment. Contact us today for a confidential discussion about your matter.