The Garnishee Order

A garnishee order is an order to a person who owes money to the debtor (called the ‘garnishee’) to pay that money to the creditor, instead of to the debtor, in satisfaction or partial satisfaction of the judgment debt. A garnishee is usually the employer of the debtor. The debtor has 21 days after being served with a ‘Provisional Garnishee Order’ to make one of two applications to the court. A Provisional Garnishee is served on both the debtor and the garnishee. The first application is an ‘application to set aside the default judgment’ if the debtor wishes to dispute the money owed or the amount. The second is an ‘application to reduce garnishee’ – the staff at the Tasmanian Magistrates Court can provide you with a document to assist you in preparing the application. If the debtor does not file an application within 21 days, a document called a ‘Final Garnishee Order’ is then served on the garnishee only, and the deductions made under the Provisional Garnishee Order will be paid out to the creditor. 

There are two kinds of garnishee order: a ‘lump sum’ order and a ‘wages’ or ‘periodic payment’ order. The most common kind of garnishee order is an order garnishing wages owing to the debtor. Only wages actually earned can be attached by a lump sum garnishee order because the debt must be ‘owing or accruing’ at the time of the garnishee order. However there are provisions in the Rules which permit the attachment of future earnings (rule 129G(3)Magistrates Court (Civil Division) Rules 1998 (Tas)). This allows a garnishee order to be made which requires the debtor’s employer to make deductions from the debtor’s wages each pay day to be paid in reduction of the judgment debt. The amount to be deducted is a specific figure set by the registrar. Generally, this amount will be 20% of the debtor’s net earnings. At any time the debtor may apply to the court for a reduction in the amount of the deductions because of his or her financial situation. This is called an 'Application to Reduce Garnishee'.

If more than one wages garnishee order is made in relation to the same debtor, they take effect in the order in which they were served on the garnishee (rule 129N, Magistrates Court (Civil Division) Rules 1998 (Tas)). If two orders are served on the same day, each has the same order, and the deduction of 20% is to be distributed equally. Orders served later are calculated on the basis of the net earnings of the debtor after the order/s with priority.

Disadvantages of a Garnishee Order

A garnishee order has some disadvantages to the debtor, including the following.

  • The order may be made when the debtor is not present in court. However, the debtor must be served with the Provisional Garnishee Order, so they will not be unaware of the proceedings. This means that there need be no hearing at which the debtor can object to the garnishment before deductions commence (although there is such an opportunity before deductions are paid to the creditor). Normally, the debtor only becomes aware that a garnishee order has been made when the order nisi is received by the employer or when deductions are made from his or her wages. Therefore it may cause financial hardship if the amount which the employer is required to deduct from the debtor’s wages each week or fortnight means that his or her income suddenly and drastically drops to an inadequate level. Although the debtor can apply for a reduction in the amount to be deducted, if his or her circumstances warrant it, this takes time and may involve time off work to attend a court hearing if the creditor cannot be persuaded to agree to the reduction.
  • It may affect the debtor’s relations with the employer as the employer may regard having to make deductions from wages as inconvenient and expensive. At worst the employer may dismiss the debtor, although most employers are unlikely to take such action.
  • A debtor may find it embarrassing or upsetting to have his or her private financial affairs revealed in this way. A garnishee order can be seen as humiliating since it could suggest that the debtor cannot be trusted to pay off the debt. On the other hand some debtors prefer it since it frees them from having to actually make payments, the deductions are made automatically and paid on their behalf, and as the money is not physically received by them it is less likely to be missed.

Action when Wages are Garnished

If the debtor disputes or is not sure that the debt is owed, or that the amount is correct, he or she should immediately contact the creditor and check the facts. This may happen where the creditor’s recovery action was not defended or where the debtor has since repaid some of the debt and the creditor has not taken that repayment into account. It may then be necessary to apply for the judgment to be set aside and for the garnishee order to be stayed in the meantime.

Where the debt is owed the debtor could, if appropriate, apply for a reduction in the amount of the deductions claiming that in view of the debtor’s family circumstances or financial position he or she is entitled to apply for a reduction in the deductions. The debtor may make the application to the court at any time and an affidavit in support of the application would normally be necessary. Obviously this would need to contain sufficient details of the debtor’s financial position to show that a reduction in the amount of the deductions was appropriate.

Once the objection is filed, the court registry will send a copy to the creditor and will give notice of the time and place of the hearing of the debtor’s application. If the garnishee order  was issued from a registry other than the one closest to where the debtor lives (for example, out of the Hobart registry when the debtor lives in Launceston) the debtor may wish to ask for the hearing to take place at the closest sitting of the court. At the hearing the debtor will have an opportunity to argue for a reduction in the amount ordered to be deducted. He or she may also be cross examined by the creditor, and should take full details of his or her financial situation so as to persuade the court that the rate of deductions set by the registrar is inappropriate.

Some debtors who have their wages garnished leave their jobs to avoid the garnishment. This is a risky procedure as the debtor may find it difficult to get another job. It will not prevent garnishment of the debtor’s wages from any new employer as soon as the creditor finds out who the employer is. Therefore it may be rather foolish to go to that trouble and risk simply to avoid repaying to the creditor a debt that is rightfully owed.

If the debtor really has some objection to having a garnishee order operate he or she should ask the creditor to accept an installment arrangement in lieu of the garnishment. Since a garnishment offers the creditor a certain amount of security in that the deductions must be made and paid over by a third party, he will need some assurance that the installment arrangement will be adhered to. For example, a periodic payment authority to a bank or similar in favour of the creditor, or perhaps even a voluntary deduction scheme if the employer will co-operate may provide that assurance. This is almost always a direct debit arrangement and therefore a ‘direct debit authority’. At the very least the creditor will probably seek to have the garnishee order only informally stayed by notice to the employer, to be revived if any installment is not paid on time.

Dismissal Due to Garnishment

Some employers rid themselves of the inconvenience and expense of garnishing an employee’s wages by dismissing the employee. People dismissed in these circumstances should complain to their union. In some cases, the union will be able to negotiate reinstatement. The employer cannot be prosecuted as it is not an offence to dismiss employees because their wages are being garnished for a civil debt. However, it may breach employment laws regarding unfair dismissal, depending on the nature of the debtor’s employment.

Where the judgment debt is for child support under an order of the Family Court or Federal Circuit Court, it is an offence to dismiss the employee. In these cases, a complaint should be made to the Family Court or the Child Support Agency if the order is registered for collection with the Agency. However the Child Support Agency provides easy and practical means or employers to comply with garnishment orders for child support.

Reducing the garnishee order

The Tasmanian Magistrates Court, Civil Division provides full support for individuals wishing to apply to have a garnishee order reduced. It is a simple process, easily followed from the Magistrates Court website.

Attachment of Wages of Public Servants

It is not possible for a creditor to use the normal garnishee procedures to attach the wages or salaries of public servants because of a rule that garnishee proceedings cannot be taken against the Crown. However, an alternative procedure does exist and is regularly used. The creditor obtains from the court a certified copy of the judgment against the debtor, and then sends this document to the department where the debtor is employed, together with a statutory declaration about the amount of the debt still owing. Deductions are then made from the debtor’s pay, and forwarded to the creditor, in the following ways:

  • For Tasmanian public servants the debtor’s paying officer is given a discretion to decide the amount necessary to be deducted to enable the judgment debt to be satisfied. Before doing so the paying officer must give the debtor written notice of the service of the copy judgment and statutory declaration, and require the debtor to advise if he or she claims the judgment has been satisfied (and, if so, to furnish evidence of that) or the amount due under the judgment.
  • For Commonwealth public servants, a similar procedure applies. Once the judgment creditor has served the documents on the paying officer, that officer contacts the public servant and inquires as to whether or not the judgment has been repaid, deductions will be made at the rate of 20% of the net salary (i.e. gross salary less income tax and superannuation contributions). The paying officer has a discretion to deduct smaller amounts if he or she is satisfied that deductions at the normal rate would cause severe hardship to the public servant (regulation 8A.9Public Service Regulations 1999 (Cth)). It is also possible for the public servant to specify a higher rate of deductions if he or she so desires. An administrative fee is payable by the creditor for the use of this deduction system. That fee is $38 (regulation 8A.6, Public Service Regulations), but the creditor, rather than the debtor, must bear this cost (s75Public Service Act 1999 (Cth);  regulation 8A.6, Public Service Regulations).

Centrelink payments

Garnishee orders, or other forms of attachment, are not available in the case of payments made under the Social Security Act 1991 (Cth) (Centrelink payments) except where the debt is to the Commonwealth for overpayment or other benefit-related payment issues (Chapter 5, Social Security Act 1991 (Cth)).

Another Act, the Social Security (Administration) Act 1999 (Cth) provides that: a social security payment is absolutely inalienable, whether by way of, or in consequence of, sale, assignment, charge, execution, bankruptcy or otherwise. However, once a social security payment has been paid into the debtor’s account it is no longer a social security payment under the Social Security (Administration) Act 1999 (Cth). It becomes part of the customer’s funds. A garnishee order on the account, equal to the amount of the customer's payment, is NOT affected by the inalienability provisions. Section 62 of the Social Security (Administration) Act provides for a saved amount to which the garnishee order CANNOT apply. The saved amount is equal to the following:

  • the total amount of the customer's payment, including advances, paid into the account in the 4 week period immediately before the order, minus
  • the total amount withdrawn from the account in the same period.

For more detailed information on debt collection and social security payments see the Financial Ombudsman Service website ‘Debt Collection and social security recipients’.

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