Garnishee Orders In Singapore: How Is It Used In Debt Collection?

by 24 June 2024Knowledge & Insights

A garnishee order in Singapore is a legal way for someone to get back money they’re owed by making a third party pay them directly. The third party could be a bank that holds the debtor’s money or an employer who owes the debtor a salary.

In banking law, garnishee orders serve as an essential enforcement mechanism for creditors. It is used extensively within the banking and financial sectors to enforce debt recovery.

In this article, we will explain how garnishee orders are used in debt collection and why they are a crucial tool for judgement creditors, debtors, and garnishees.

Types Of Debts That Can Be Recovered Using A Garnishee Order

Garnishee orders can help recover various types of debts, provided that these debts are fixed sums of money ordered by the Court to be paid. Common types of debt include:

  • Unpaid Loans: Money borrowed but not repaid as agreed can be recovered through a garnishee order.
  • Credit Card Debts: Overdue payments on credit cards are eligible for recovery via garnishee proceedings.
  • Unpaid Rent: Landlords can recover unpaid rent from tenants through a garnishee order.
  • Legal Judgements: Any financial judgements awarded by a court, where one party is required to pay another, can be enforced using a garnishee order.
  • Unpaid Salaries: Sometimes, a business owner’s unpaid salaries to employees (where a legal judgement has been obtained) can be subject to garnishment.
  • Unpaid Taxes: Overdue taxes legally ordered for payment can sometimes be collected through garnishee orders against individuals or businesses.


The Three Parties Involved In Garnishee Proceedings

In the context of garnishee proceedings, three primary parties are involved: the judgement creditor, the judgement debtor, and the Garnishee. The following points will best explain the roles and responsibilities of each party.

  • Judgement Creditor: This party has successfully proven in Court that a sum of money is owed to them by the debtor. Armed with a court judgement, they seek to recover the owed funds through various legal mechanisms, one of which is the garnishee order.
  • Judgement Debtor: This party is the individual or entity that owes money to the creditor as determined by a court judgement. The debtor’s assets, specifically those held in bank accounts, become the target for recovery through the garnishee process.
  • Garnishee: In a bank or financial institution, the Garnishee usually has the debtor’s assets or money. Upon receiving a garnishee order from the Court, the Garnishee is legally obligated to transfer funds from the debtor’s account to the creditor, subject to certain legal and procedural safeguards.

Role Of Banks

Banks are legally obligated to comply with garnishee orders by withholding and remitting the specified funds from the debtor’s account to the creditor.

They must accurately identify the funds available in the debtor’s account, ensuring that only the funds subject to the garnishee order are seized. Certain types of accounts or funds may be protected or exempt from garnishment.


How Does A Judgement Creditor Apply For A Garnishee Order In Singapore?

In Singapore, the procedure to obtain a garnishee order is outlined in Order 49 of the Supreme Court Rules. This legal framework provides a structured approach for judgement creditors to follow when seeking to recover debts from judgement debtors through third parties, known as garnishees.

Application For Garnishee Order To Show Cause

The judgement creditor must first apply a Garnishee Order To Show Cause personally or through a lawyer. It is made by way of an ex parte summons, which means it is done without the other party’s presence, in this case, the judgement debtor.

The creditor must provide an affidavit to the Court, which should indicate the following:

  • Evidence of the Debt: It must detail the amount the judgement debtor owes and confirm that the debt remains unpaid.
  • Details of the Garnishee: It should identify the third party (the Garnishee) believed to be owing money to the judgement debtor or holding funds on their behalf.
  • Justification for the Order: The affidavit may also need to include any additional information that justifies the issuance of a garnishee order, such as previous unsuccessful attempts to recover the debt.

They may also apply for a court order for Examination of Judgement Debtors to find out the assets that can be used to pay off the debt.

Issuance Of Garnishee Order To Show Cause

If the Court is satisfied with the creditor’s application, it will issue a Garnishee Order To Show Cause, a temporary order served on the Garnishee (e.g., a bank holding the debtor’s funds).

It requires them to either pay the judgement debt from the debtor’s assets under their control or appear in Court to explain why they cannot do so.

Service Of Order On Garnishee And Judgement Debtor

The Garnishee Order Nisi must be served on both the Garnishee and the judgement debtor one week or seven days before the show cause hearing. This ensures that both parties are aware of the Court’s order and the Garnishee’s obligations under it.

Show Cause Hearing

A show cause hearing is then scheduled, during which the Garnishee can present reasons why the funds should not be paid to the creditor. The judgement debtor may also attend and raise objections to the garnishee order.

Issuance Of Final Garnishee Order

If the Court is not persuaded by any arguments against the payment of the funds, it will issue its final decision. This final order mandates the Garnishee to pay the creditor directly from the debtor’s assets under their control.

Throughout this process, the judgement creditor needs to follow the specified procedures closely to ensure the garnishee order is obtained successfully.


How Does The Garnishee Transfers Funds To The Creditor?

After the Court issues the Order Absolute, the Garnishee is notified of their obligation to transfer the specified amount from the debtor’s account or funds to the creditor. Here’s how:

  • Identification of Funds: The Garnishee must identify and segregate the funds in the debtor’s account subject to the Garnishee order. This may involve checking the bank account balance and ensuring the funds are not protected or exempt from garnishment under specific legal provisions.
  • Transfer of Funds: The Garnishee executes a transfer of the specified funds from the judgement debtor’s bank account directly to the creditor or the creditor’s designated account. The transfer must comply with the Court’s order, including any specific instructions about the amount and timeframe.
  • Confirmation to Court: After transferring the funds, the Garnishee typically confirms to the Court and both parties (the creditor and the debtor) that the payment has been made per the Garnishee order.
  • Settlement of Debt: The transferred funds are applied to settle the debtor’s obligation to the creditor. The debt may be partially or fully satisfied depending on the amount recovered through the garnishee order.


Challenging The Order During Garnishee Proceedings

If both the Garnishee (e.g., a bank or an employer) and the debtor disagree with a garnishee order, each party has the right to challenge the order during the legal proceedings.

This procedural framework is designed to balance the interests of all parties involved and ensure the fair and efficient enforcement of debt repayment or recovery.

Their disagreement with the order must be communicated through formal legal channels, typically starting with the show cause hearing scheduled after the issuance of the provisional Garnishee Order.

  • Legal Grounds: The Garnishee can challenge the order on various legal grounds, such as claiming the funds are exempt from garnishment, disputing the debtor’s account balance, or arguing that they do not hold any funds for the debtor.
    The Garnishee may also argue that the debtor’s funds are in a joint account, potentially impacting an innocent third party.
  • Disputing the Debt: The debtor might deny the debt’s existence or amount. They could argue that the debt has been paid, settled, or discharged in some other way.
  • Exempt Funds: The debtor may claim that the funds in the account are exempt from garnishment. For example, certain social security benefits or other protected income might not be legally accessible to creditors.
  • Procedural Defences: The debtor might also challenge the garnishee order on procedural grounds, such as improper service of the documents or lack of jurisdiction.
  • Incorrect or Insufficient Funds: There may be disputes regarding the availability or sufficiency of funds in the debtor’s account. For example, the debtor’s account may not have enough funds to cover the debt, leading to challenges in fully satisfying the creditor’s claim.
  • Joint Accounts: When the debtor’s funds are held in a joint account with another individual not party to the debt, disputes can arise over the garnishment of these funds. The non-debtor account holder may challenge the garnishee order to protect their share of the account’s funds.

The Court will consider the objections the Garnishee and the debtor raised. If the Court finds the objections valid, it may refuse to make the Garnishee Order absolute, modify it, or dismiss the proceedings.


Conclusion About Garnishee Orders In Singapore

When a person cannot recover a debt owed to them, applying for a garnishee order in Singapore offers a legal pathway to claim the funds directly from a third party holding the debtor’s assets.

If you receive such an order, it’s crucial to understand your rights and obligations, whether you’re the creditor, debtor, or Garnishee. Tembusu Law stands ready to assist you in understanding the complicated legal processes.

With expertise in handling garnishee orders, our experienced attorneys can provide invaluable support and guidance, ensuring that whether you’re seeking to recover debts or responding to an order, your legal interests are effectively managed and protected. Reach out today!


Frequently Asked Questions About Garnishee Orders In Singapore

How Does A Garnishee Order Affect A Debtor’s Credit Score?

A garnishee order can negatively impact a debtor’s credit score as it is a record of failure to pay a debt, leading to enforced recovery measures. It can affect the debtor’s ability to obtain loans, mortgages, or other forms of credit in the future.

What Happens If A Garnishee Order Is Issued Against Insufficient Funds In The Debtor’s Account?

If the funds in the debtor’s account are insufficient to satisfy the debt, the garnishee order will only capture the available funds. The creditor may need to pursue other enforcement actions for the remaining debt or wait to see if sufficient funds become available in the account later.

Can A Debtor Negotiate A Payment Plan After A Garnishee Order Is Issued?

Yes. A debtor can still negotiate a payment plan with the creditor even after a garnishee order is issued. If both parties agree to a plan, the creditor can request the Court to suspend or cancel the garnishee order to allow the new payment arrangement.

What Protections Exist For Debtors In The Garnishee Order Process?

Singapore law provides protections for debtors in the garnishee order process, including the requirement for a court order before funds can be seized, the opportunity to challenge the order, and the protection of certain types of funds from garnishment, ensuring that basic living expenses can be met.

About the author

About the author

Tembusu Law


We'll always make time for you. Tell us what's on your mind and we'll find a way to help.