Civil Enforcement in NZ: What if Your Debtor Fails to Make Voluntary Payments?

When a debtor fails to make payments, it can be frustrating and stressful for creditors. In New Zealand, civil enforcement is a legal process that enables creditors to recover debts through the court system. But what happens if your debtor fails to make voluntary payments? In this blog, we’ll explore the options available to creditors and the role of civil enforcement in NZ.

Understanding the Importance of Civil Enforcement

Civil enforcement plays a vital role in maintaining a stable economy and promoting business growth in NZ. It provides a framework for creditors to recover debts, reducing the risk of bad debts and promoting fair trade practices. By understanding the enforcement process, creditors can take proactive steps to recover debts and minimise financial losses.

Voluntary Payments: The First Step

Before initiating civil enforcement proceedings, it’s essential to try to negotiate voluntary payments with the debtor. This approach can save time, money, and resources for both parties. Creditors should communicate with the debtor, explaining the debt amount, payment terms, and any consequences of non-payment. If the debtor agrees to make voluntary payments, it’s crucial to establish a payment plan and monitor progress.

Benefits of Voluntary Payments

Voluntary payments offer several benefits, including:

• Reduced Costs
  Negotiating voluntary payments can reduce the costs associated with proceedings.
• Improved Relationships
  A voluntary payment agreement can help maintain a positive relationship between the creditor and debtor.
• Faster Recovery
  Voluntary payments can expedite debt recovery, ensuring creditors receive payment sooner.

What if Voluntary Payments Fail?

Despite best efforts, debtors may still fail to make voluntary payments. This is where civil enforcement comes into play. In NZ, creditors can take legal action to recover debts through the District Court or High Court, depending on the debt amount. The civil enforcement process involves the following stages:

Judgment

To initiate proceedings, creditors must obtain a judgment from the court. This involves filing a claim, serving the debtor, and attending a hearing. If the debtor fails to respond or attend the hearing, the court may grant a default judgment in favor of the creditor.

Default Judgment: What it Means

A default judgment is a significant step in the civil enforcement process. It means the court has ruled in favour of the creditor, and the debtor is legally obligated to pay the debt. A default judgment can have serious consequences for debtors, including damage to their credit score and potential asset seizure.

Enforcement Options

Once a judgment is obtained, creditors can explore various enforcement options, including:

• Debtor Examination
  The creditor can request a debtor examination, where the debtor is required to attend court and provide financial information.
• Warrant to Seize Property
  The creditor can apply for a warrant, allowing bailiffs to seize and sell the debtor’s assets to settle the debt.
• Garnishee Order
  The creditor can request a garnishee order, which requires a third party (such as the debtor’s employer or bank) to deduct payments from the debtor’s income or account.
• Bankruptcy or Liquidation
  In extreme cases, creditors may consider petitioning for the debtor’s bankruptcy or liquidation.

Role of Civil Enforcement Agencies

In NZ, agencies, such as debt collection agencies or law firms, can assist creditors in recovering debts. These agencies can help with:

• Debt Collection
  They can communicate with the debtor, negotiate payments, and follow up on outstanding debts.
• Legal Action
  They can initiate and manage legal proceedings, including obtaining judgments and enforcing debt recovery.
• Asset Investigation
  They can conduct investigations to locate and seize the debtor’s assets.
• Expertise and Resources
  Civil enforcement agencies possess the necessary expertise and resources to navigate the complex legal process, ensuring creditors receive the best possible outcome.

Benefits of Working with Civil Enforcement Agencies

Collaborating with civil enforcement agencies offers several benefits, including:

• Increased Success Rate
  Civil enforcement agencies have a higher success rate in recovering debts due to their expertise and resources.
• Time-Saving
  Outsourcing debt recovery to an agency can save creditors time and effort.
• Cost-Effective
  Civil enforcement agencies can help reduce the costs associated with debt recovery, including legal fees and court costs.