Debtor Examinations and Attachment Orders
Debtor Examinations And Attachment Orders
1. On 14 April 2014 the procedure for obtaining attachment orders against judgment debtors was radically reformed. Until recently, the main method of enforcing a debt against a debtor who does not own property was to apply to the court for a debtor examination hearing and an attachment order. At the hearing the Court Registrar would ask the debtor about their finances and, depending on their income, would usually make an order for a weekly or fortnightly sum of money to be paid, usually by automatic payment, to the creditor.
2. Although the hearing procedure is still available, attachment orders can now be made after a written application from the creditor, without any information about the debtor. If the debtor is not on a benefit, and no information is available to the registrar about the debtor’s income, it is difficult to see how an attachment order can be made, as the total deducted from the debtor’s income (including other attachment orders and things like child support payments) must not exceed 60%. However, where the debtor is on a benefit the information is readily available to the registrar and the application should be very straightforward.
Problems with the Current Regime
3. The current regime has been criticised for a number of reasons. The debtor has to be served in person and must attend the hearing in front of the registrar before an order can be made. In small towns like Blenheim, debtor examinations were conducted by registrars from Nelson who came over only every couple of weeks. If the debtor did not turn up, as often happened, a warrant for arrest would be issued, but it might be some further weeks before the debtor was located and brought before a Nelson registrar to be examined.
4. Once an order was made, it would be attached to the debtor’s benefit or income if there was one. The debtor often has other debts and the benefit or income is usually low. The weekly amount is usually between $5.00 to $20.00, and that is unlikely to change much. In some situations the income will be so low that no award will be made. If circumstances change, the creditor will need to apply again for a new hearing and a new attachment order to be made. If the debtor is on a benefit and the benefit changes, for example, from a job seekers benefit to a sickness benefit, the attachment order will end. The creditor would need to apply for a new hearing and a new attachment order.
Obtaining an attachment order
5. The hearing process still exists and creditors may still apply for what is now called a financial assessment hearing. However, there are now two important alternatives.
6. First, as discussed above the creditor may apply in writing for an attachment order, without any information on the debtor’s income or benefit. There is a $50 application fee. The creditor may request a specific amount to be paid each week or fortnight, or may request a percentage of the debtor’s income.
7. A second new alternative to a court hearing is for the creditor to apply for the court to obtain information on the debtor’s finances. The registrar can then obtain the same information which would have been obtained at a hearing but using the telephone. This avoids requiring the debtor to attend court. The registrar can then make the attachment order as would have occurred after a hearing, although the creditor will not have an opportunity to make submissions or ask the debtor any questions.
8. The amount of the order which can be made is now closely prescribed. When all deductions from the debtor’s income are stacked up, including all attachment orders, and any debts or child support payments, the debtor must be left with at least 60% of their income. This may help to achieve certainty, at least where there is an easily quantifiable benefit. However, where the income is unclear (and debtors can sometimes be very reticent about this) it may be difficult to pinpoint accurately how much 60% would be.
9. The reforms also provide for attachment orders to be made by agreement, and for the creditor to be able to request financial information from debtors and supply it to the court themselves.
10. The other significant reform is that for the purposes of debtor examinations service on the debtor can be established by sending a document to the debtor’s last known place of residence, leaving the document at the recipient’s place of residence or work with another person or by e-mail.
11. At the moment many debtor examinations are adjourned because the debtor has not yet been served. This reform, although controversial, is going to help avoid delay in obtaining orders.
Varying Attachment Orders
12. The wording in the statute is ambiguous, but the reforms appear to be intended to make it easier for creditors to apply to vary an attachment order. For example, if the debtor’s benefit changed the attachment order could be easily modified to attach to the new benefit. This should be facilitated by the new rules on service. Once the debtor has been served, which can be done simply by sending the application to vary to the debtor’s last known address, the attachment order can be varied “even though the other party has not had the opportunity to make representations to the court about the application”.
Will lawyers be involved any more?
13. If creditors apply in writing or for the registrar to examine the debtor by phone, neither creditors nor their lawyers will be able to ask the debtor questions, or try to influence the debtor’s decisions through submissions.
14. Some creditors may be annoyed at the lack of an opportunity to be involved in the process. However, even if a financial assessment hearing at court is requested, it is very difficult for the creditor or the lawyer to influence the registrar’s decision. In most cases the debtor’s income is small, there are other debts, and it is difficult to get an attachment order of more than $20 per week. Given the gains made by the reforms in terms of efficiency, the lack of involvement in the process is a small price to pay.