The road to recovery: Enforcing a judgment debt – Part 3

Commercial, Property

In Part 2 we featured Garnishee Order and Writ for the Levy of Property. In our final part we look at the Bankruptcy process and issuing a Creditor’s Statutory Demand. 

  1. Bankruptcy or Creditor’s Statutory Demand


If a judgment debtor is an individual (as opposed to a company), a judgment creditor may apply to have the judgment debtor made bankrupt. The requirements are that a judgment debt of over $5,000.00 exists which is not more than 6 years old.

Having a judgment debtor made bankrupt follows the process set-out below:

  1. obtain a judgment debt;
  2. apply for a bankruptcy notice;
  • serve the bankruptcy notice;
  1. file a creditor’s petition with the Court (21 days after service of the bankruptcy notice); and
  2. sequestration Order made by the Court.

An application for a bankruptcy notice is made by application to the Australian Financial Security Authority (AFSA).   Once served with the bankruptcy notice, the judgment debtor must comply with the notice within 21 days.

To comply with the bankruptcy notice a judgment debtor can either pay the debt or enter into a payment plan with the judgment creditor. If the judgment debtor does not comply they will be taken to have committed ‘an act of bankruptcy’.

If the judgment debtor has committed an act of bankruptcy, the judgment creditor can present a creditor’s petition to the Court for a sequestration order, which is an order which makes the judgment debtor bankrupt.

Creditors Statutory Demand

If a judgment debtor is a company and the debt is at least $2,000, the judgment creditor may issue the company with a creditor’s statutory demand. The Corporations Act 2001 (Cth) specifies the form to be used in making a statutory demand.

If the company fails to pay the judgment debt; or to propose a satisfactory payment plan to the creditor; or apply to the Court to have the debt set aside, the company is presumed to be insolvent.

If the company has failed to address the statutory demand, winding up proceedings can be commenced. We find that serving a statutory demand usually kick-starts company officers to take action to satisfy the debt to prevent the creditor from initiating winding up proceedings.


In most circumstances the judgment creditor has some form of commercial or private relationship with the judgment debtor. The past relationship will usually guide the way in which the creditor wishes to enforce the judgment debt.