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You are here: Home / News / Bankruptcy & Insolvency / Debt Recovery under $10,000 – Small Claims Division

13/09/2013

Debt Recovery under $10,000 – Small Claims Division

In recent years the Small Claims Division of the Local Court has been established and has jurisdiction to hear and determine actions for the recovery of any debt, demand or damage (whether liquidated or unliquidated) up to an amount of $10, 000. The object of the jurisdiction is to conduct legal proceedings on a “fast, cheap, and informal” basis where the rules of evidence do not apply.

Once a Statement of Claim is served on the Defendant and the Defendant files a Defence, the matter is listed for Pre-Trial Review before a Registrar. At the Pre-Trial Review, the parties are required to attempt to conciliate a settlement without the necessity of proceeding to the hearing of the proceeding. In the event the parties are unable to reach a settlement, the matter is listed for Small Claims Hearing. No oral evidence is given at Small Claims Hearings and any statement or documentation intended to be relied upon at a hearing must be filed and exchanged with the other party approximately one month prior to the hearing.

Initially, the Small Claims Division was developed to enable parties to initiate proceedings without legal representation. In this regard, the Court’s power to award costs is limited to a scale depending on the amount of the parties claim.

Once a successful verdict is obtained against a party (s) the Court generally allows a period of 6 weeks for the amount of the Judgment to be paid. In the event the Judgment debt is not paid one of the following enforcement proceedings can be commenced against the Judgment Debtor(s):

  1. Examination Notice & Examination Order: This method of enforcement is usually used when you have no or very little information about the debtor and his/her financial position. A creditor would file an Examination Notice seeking financial information from the debtor, and if the debtor fails to respond, the creditor may request an Examination order, requiring the debtor to be examined at the Court in the district specified in the Examination Order. The debtor is examined by the creditor’s solicitors or their agents as to his or her property and other means of satisfying the debt and generally as to his or her circumstances. The debtor may also be required to bring to the Examination Hearing documents which show the debtor’s true financial position. Examples of such documents are tax returns, bank statements, pay slips and letters from the Department of Human Services/Centrelink. Where the debtor is a company, a director (s) of the debtor company may be summoned in relation to any assets or any other means of satisfying the Judgment as well as documents evidencing the company’s financial circumstances.
  2. Garnishee Orders: Garnishee is a procedure whereby the creditor attaches debts to or accruing to the debtor to the third party (the Garnishee) in order to satisfy the Judgment debt.There are two basic kinds of Garnishee proceedings:
  • An order for the attachment of debts due and under Section 47(2)(A) of the Civil Claims Act 1972 (“the Act”). In these circumstances if you have details relating to the Judgment Debtor’s bank account(s), a Garnishee Order may be issued attaching the funds, if any, held in the said accounts pursuant to the section.
  • An order for the attachment of debts due and under Section 47(2)(A) of the Civil Claims Act 1972 (“the Act”). In these circumstances if you have details relating to the Judgment Debtor’s bank account(s), a Garnishee Order may be issued attaching the funds, if any, held in the said accounts pursuant to the section.
  • A Garnishee Order for the Attachment of Wage or Salary under Section 48 of the Act. This Garnishee is said to operate for a period of four weeks after the Garnishee Order is served, however usually an appropriate instalment arrangement is entered into with the debtor, whereby the payments are deducted from his/her wage or salary and forwarded directly to our office.
  1.  Writ of Execution – Execution is the process whereby the Sheriff or Bailiff is empowered to levy upon (i.e. seize and when necessary, to sell) the debtor’s property in order to repay the Judgment debt. The Sheriff or Bailiff may cause to be sold all the goods, chattels and other personal property other than chattels will of the Judgment Debtor.  In certain circumstances the land of the Judgment Debtor can be seized and sold. Once the goods and chattels of the debtor are seized they are sold at a public auction.
  2. Bankruptcy – Under the Bankruptcy Act 1966, “the Bankruptcy Act” the Federal Court and the Federal Magistrates Court of Australia have the power to hear and decide bankruptcy cases. The Bankruptcy Act sets up a structure, within which, the money received from the sale of bankruptcy property is distributed by a trustee to creditors on a pro-rata basis. A creditor may make a debtor bankrupt only if the amount owed, to the creditor exceeds $5,000.00, or a combination of creditors to whom debts totalling $5,000.00 are owed may join together to make the debtor bankrupt.  To make a debtor bankrupt, a creditor usually applies to the Registrar of Bankruptcy, who issues a bankruptcy notice requiring the debtor to pay the debt within a set time, usually 21 days. The debtor who is not able to pay the debt within that time commits an act of Bankruptcy, which gives the creditor the right to petition to the Court to declare the debtor bankrupt. The idea of bankruptcy, and especially the Bankruptcy notice can often be a successful device used to persuade the debtor into paying a debt.

Contact us to find out more or to arrange a consultation with our debt recovery team in Sydney.

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