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Property seized to satisfy a debt

Information about property that is seized under a court order when the person owes money.

Debt procedure in Magistrates Court

If someone owes money (debtor) to another person or company (creditor), the debtor can be taken to court to try to force them to pay.

The person who claims that they are owed money make what is called a 'complaint' to Magistrates' Court (provided the amount is under $100,000). The complaint form must be filed with the registrar of that court. This complaint form must then be delivered (with 2 copies of notice of defence) to the alleged debtor.

The debtor must lodge a notice of defence within 21 days, or court will hear the matter without the debtor having the opportunity of giving their side of the story. This is called a 'judgement in default of defence'. Other costs will generally have been added to the original amount owed (creditor's costs and interest on the amount).

Enforcement

Once the court had granted this order, the creditor can then seek to have the court orders enforced. Enforcement of the order can be achieved in a number of different ways. It is up to the creditor to decide when and how to enforce the debt.
If the creditor believes that the person who owes money has any property that can be seized and sold to cover the amount of money owed, they can seek an order for a 'warrant to seize property'. This warrant is generally issued by Registrar of the Magistrates' Court where the judgement was made.

The warrant will then be sent to sheriff's office. Even more money will be added to the debt at this stage to cover the sheriff's costs.

The sheriff will go to the debtor's house and will produce the warrant and will explain that if the debt is not paid, that property will be seized and auctioned to pay the debt.

The debtor will generally be given an opportunity to pay the money or to apply to court for an order to pay debt off by making instalments.

A Sheriff may not enter the debtor's house without permission unless there is an open window or door. However, they can forcibly enter a building that is not connected to the main part of the house (typically a garage or shed) without permission.

Protected goods

There are a list of goods that can't be seized by a sheriff. These are listed in Section 116(2) Bankruptcy Act 1966 (Cth).

Goods also can't be seized if they are not solely owned by debtor. If the sheriff disputes ownership—the other owner should request that the sheriff issue an interpleader summons in Magistrates' Court so that ownership can be determined. It will assist if some proof of ownership can be brought as evidence.

Auction of goods seized

Goods that have been seized by the sheriff are generally sold at auction at the premises of the Sheriff. The auctions are held monthly. Auction prices are generally much lower than the actual value of the item.

If a creditor discovers that the person in debt owns real estate, they may issue a warrant of seizure and sale. These warrants must be obtained from Supreme or County Courts, depending on the value of the property. The debtor will be allowed some time to organise for the sale of their property. If the property is not sold at the end of this time, the sheriff will put the property up for sale at auction. If the property is jointly owned, only the portion owned by the debtor can be sold.

An alternative would be for creditor to initiate Bankruptcy proceedings if property is owned jointly.

More information

Legislation

Bankruptcy Act 1966 (Cth)

  • s. 116(2)—property divisible among creditors (lists protected goods that can't be seized to cover a debt)

See Bankruptcy Act 1966 (Cth).

Supreme Court Act 1986 (Vic)

  • s. 42—property available to satisfy a judgment debt—excludes certain goods from seizure (refers to Commonwealth Bankruptcy Act 1966)

See Supreme Court Act 1986 (Vic).

Magistrates Court Act 1989 (Vic)

  • Part. 4 Div. 3 Subdiv. 4—warrant to seize property
  • s. 73—when warrant may be issued, who warrant be directed to, and what warrant authorises
  • s. 78(1)(b)—the warrant must specify the items to be seized

See Magistrates' Court Act 1989 (Vic).

Magistrates' Court General Civil Procedure Rules 2010 (Vic)

  • Order 12—interpleader procedure where ownership is disputed after sheriff seizes property under a warrant

See Magistrates' Court General Civil Procedure Rules 2010 (Vic).

Reference

Fitzroy Legal Service

Fitzroy Legal Service's Law Handbook has information about the way debts are enforced.

See Are you in debt?

Updated