Show Me the Money: Enforcing Court Orders for Debt Payment
When confronted with a debtor who is either insolvent or unwilling to pay, several strategies can be employed to enforce a court-ordered debt payment.
Engage personally with the debtor
Before pursuing legal remedies, consider engaging with the debtor to resolve the matter amicably. However, ensure all communications are documented in writing.
Statutory Demand
If the debtor is a company, a creditor may serve a statutory demand, provided the debt is not disputed and exceeds $2,000. A statutory demand gives the debtor company three options:
- Pay the amount owing
- Reach a compromise with the creditor
- Apply to the Court to set the demand aside within 21 days.
If the company fails to respond to the demand within the timeframe, the creditor can apply to liquidate the debtor company, something a company will generally wish to avoid at all costs.
Liquidation
Liquidation results in the appointment of a liquidator who will seize all of the unsecured assets of the debtor company and sell them to maximise returns to the company’s creditor.
For individual debtors (not companies) a creditor may file for a bankruptcy notice through if they have a judgment debt exceeding $10,000 (or two or more final judgements or orders that, taken together, are for an amount of at least $10,000). If this happens, the trustee in bankruptcy will take control of the individual debtor’s finances and assets and attempt to repay creditors.
Prevention is the best cure
In many cases, it is simply unavoidable that a creditor will need to pursue unpaid debts. However, the best thing to do is to avoid the need to collect it in the first place. A business owner can structure their dealings in such a way that the risk of unpaid debts is reduced, or such that repayment is easily obtained. The best prevention for unpaid debts is, of course, due diligence, including credit checks, proper documentation of transactions, and where appropriate, obtaining personal guarantees or security interests registered on the Personal Property Securities Register (PPSR).
If you have any questions about your next steps in your debt repayment matter, please do not hesitate to let me know. I am here to help.
DISCLAIMER: This article is for informational purposes only and does not constitute legal advice.