PART 9
APRIL 2014
ATTACHMENT OF EARNINGS AND ATTACHMENT OF DEBT
On the application of a judgment creditor, the court can make an attachment of earnings order under which the debtor’s employer is required to deduct specified amounts from the debtor’s earnings and pay them into court. These sums will be used to discharge the judgment creditor’s debt [note 1].
9.154 Attachment of earnings order and bankruptcy (amended July 2014)
On the making of a bankruptcy order, a creditor who has a provable debt is not entitled to retain the benefit of an attachment of earnings (see paragraph 9.153) [note 2] unless it was completed and the sums paid before the commencement of the bankruptcy [note 3]. The creditor will be entitled to any monies paid into court between the petition date and the date of the bankruptcy order unless he/she had received notice of the presentation of the petition [note 4]. The court may discharge the attachment of earnings order on the making of a bankruptcy order [note 5]. It is anticipated that the order would be discharged on notification to the court of the making of the order.
The official receiver should normally only become involved in the discharge of an attachment of earnings order where such is necessary for the purposes of enabling the bankrupt to comply with an IPO/IPA. Similarly, any application that post-bankruptcy payments to the creditor are reclaimed for the benefit of the bankruptcy estate should only be made in connection with an IPO/IPA, since the monies represent post-bankruptcy income (see paragraphs 31.7.42 to 31.7.143 for IPAs and paragraphs 31.7.152 to 31.7.153 for IPOs). Otherwise, the bankrupt should seek his/her own legal advice as to whether an application to discharge the attachment or earnings order or reclaim post-bankruptcy monies taken by the creditor should be made.
9.155 Third party debt orders (attachment of debt)
A third party debt order is where a judgment creditor is able to clam, for his/her benefit, money which is due to the debtor from a third party, often the debtor’s bank or building society. Such an order was formerly known as a garnishee order and the process is known as the attachment of a debt [note 6].
The process is that the court will make an interim third party debt order on a without-notice application by the creditor. At a later hearing, the court will make a final third party debt order unless any interested parties make representations to the court as to why the order should not be made. The judgment creditor will then be able to claim the money.
9.156 Third party debt orders (attachment of debt)
Any attachment of debt (see paragraph 9.155) which is not complete (that is, where the money has not been paid over to the creditor) prior to the commencement of the winding-up or bankruptcy will be void against the liquidator or trustee [note 7] [note 8].
If an interim third party debt order has not been made final prior to the making of a winding-up or bankruptcy order, the official receiver should follow the guidance in paragraph 9.129.
[Back to Part 8 – Liens]