A Garnishee Order is a legal directive issued by a court to a third party (usually a bank or an employer) that holds funds on behalf of a judgment debtor (the person who owes money to the judgment creditor). The purpose of a Garnishee Order is to enforce the payment of a debt owed by the judgment debtor to the judgment creditor. The third party served with the order is called the “garnishee.”
Here’s a detailed explanation of Garnishee Orders in banks:
- Issuance of Garnishee Order:
- A Garnishee Order is typically issued by a court after a judgment creditor successfully obtains a money judgment against a debtor through a legal process known as a lawsuit or judgment. The court order directs the garnishee (the bank) to withhold funds from the judgment debtor’s bank account to satisfy the outstanding debt.
- Service of Garnishee Order:
- Once the Garnishee Order is issued by the court, it is served on the bank where the judgment debtor holds an account. The order informs the bank that it must freeze or withhold a specific amount of funds in the debtor’s account, up to the value of the debt owed to the judgment creditor.
- Freezing of Funds:
- Upon receiving the Garnishee Order, the bank is legally obliged to freeze the specified amount of funds in the judgment debtor’s account. This prevents the debtor from accessing or withdrawing those funds until the court resolves the matter.
- Notice to Judgment Debtor:
- After the funds are frozen, the bank must notify the judgment debtor about the Garnishee Order and the amount of funds withheld. The debtor is also informed about their right to challenge the order in court if they believe it was issued in error or if they have valid reasons to oppose it.
- Objections and Challenges:
- The judgment debtor has the right to challenge the Garnishee Order in court by filing objections within a specified period. The debtor can raise objections if they believe the order is incorrect, if the funds in the account are exempt from garnishment under the law, or if there are other valid reasons for opposing the order.
- Remittance to the Court:
- If the judgment debtor does not challenge the Garnishee Order within the stipulated time or if the court dismisses their objections, the bank is required to remit the frozen funds to the court. The court then uses the remitted amount to pay the judgment creditor towards the outstanding debt.
- Release of Funds:
- If the court finds in favor of the judgment debtor or if the creditor and debtor reach a settlement, the Garnishee Order is lifted, and the bank releases the frozen funds back to the debtor’s account.
It’s important to note that Garnishee Orders are legal measures used to enforce the payment of debts, and they are subject to specific laws and regulations in different jurisdictions. The garnishment process aims to ensure that judgment creditors can recover the money owed to them, but it also provides protections and opportunities for judgment debtors to address any inaccuracies or legitimate objections to the garnishment. Banks must comply with Garnishee Orders and follow the court’s instructions precisely to avoid any legal liabilities.