A creditor in a debt recovery matter can collect more information about the judgment debtor’s financial position through examination. The examination of a debtor isn’t a way to enforce the debt but rather, obtain more information about their assets, liabilities, income and expenditure. This can help you determine what recovery options are available or even if the debtor is worth pursuing.
What is the First Step?
Under the Uniform Civil Procedure Rules (NSW), you will need to prepare and send an Examination Notice to the Judgment Debtor.
There are two different forms available for judgment creditors – one for individuals and the other for companies. The examination notice asks questions of the judgment debtor, such as:
- What is your current income?
- What is the name of your employer?
- If your employer pays your salary into a bank or financial institution, what are the details (branch, BSB and account number)?
- What assets do you own (such as real estate, household contents and motor vehicles)?
- If you hold any investments, what is the name and type of investment?
- What are your current liabilities (utilities, motor vehicle expenses and grocery bills)?
The examination notice can also request copies of documents from the judgment debtor, such as:
- income tax returns (usually for a period before the judgment),
- any profit and loss statements or balance sheets (if the judgment debtor is a company),
- bank statements,
- pay slips or copies of group certificates,
- any loan agreements and/or mortgage documents, and
- any documents relating to motor vehicle ownership (e.g. registration papers).
A judgment debtor should receive at least 28 days to respond to the Examination Notice.
If the judgment debtor does not respond or fills in the Examination Notice incorrectly, you can apply to the court for an Examination Order. You can file for an Examination Order through a Notice of Motion to the court. An affidavit must also accompany the Notice. Further, you as the judgment creditor can add these costs to the judgment debt amount.
An Examination Order compels the judgment debtor to attend court for a face-to-face examination. It’s still an informal process, and the court does not usually intervene.
The court may grant an extension of time if a party requires postponing the examination. However, if the judgment debtor is actively trying to avoid examination, they could face a warrant for their arrest to force them to attend.
As mentioned, the examination is not a means of enforcement. Rather, it’s a way to probe into the judgment debtor’s financial position. The information you obtain through this process can then assist you to determine the following:
- Does the judgment debtor have sufficient assets worth pursuing?
- What possible course of action should you take?
Another benefit is that it can prompt a judgment creditor into making an offer to pay the debt.