Garnishment is when money belonging to one person (the debtor) and owed to another (the creditor) and which is in the possession or control of a third person (the garnishee) is ordered paid by the garnishee to the creditor on account of the debtor’s debt. A court must order garnishment—a creditor can not do this on its own. Before getting the court to order garnishment, the debtor must establish its legal right to the money, which typically means suing and winning a judgment in its favor. (Tax authorities do not need to do this to establish their right to money owed for unpaid taxes, however.)
Garnishment is available for any debt, coming out of any legal obligation to pay. It is most commonly used, however, for consumer debts (including credit cards), alimony and child support, and taxes.
Wage garnishment is a specific kind of garnishment. It is when part of the debtor’s wages or salary are sent to the creditor for the debt.
Kentucky Garnishment Exemptions and Non-Exemptions
Everywhere in the United States, Social Security (if it can be garnished at all—some states do not allow any garnishment of Social Security) can be garnished only for child support, alimony, and a very few kind of federal debts, of which the main one is for unpaid taxes.
Besides Social Security, several other types of non-wage, non-salary income are protected, or exempt, from garnishment in Kentucky:
- Pensions benefits: Kentucky has broad protection for pensions. Like most states, Kentucky exempts state worker pensions, as well as the pensions of several types of county or municipal employees (such as police, firefighters, and teachers), from garnishment. The state also exempts other pension benefits from garnishment, too. However, it does not exempt distributions from non-pension retirement saving accounts, such as IRAs or 401(k)s.
- Many kinds of public benefits or assistance are protected, such as: workers’ compensation; unemployment benefits; aid to families with dependent children; crime victim’s compensation; and assistance to the blind, aged, and disabled.
- Alimony or child support: an amount necessary to actually support the recipient(s) is exempt.
- Kentucky also has fairly broad protection for income from annuities or insurance policies. The proceeds of—
- o group life insurance polices;
- o health and disability benefits;
- o life insurance polices issues by cooperative insurance companies or benefits from fraternal societies;
- o insurance polices whose terms prohibit the proceeds being used to pay creditors;
- o and (in an odd throwback, to a time before gender equality) life insurance policies where the beneficiary is a married woman
—are all protected from garnishment.
However, not all the exemptions or protections referred to above are absolute. Several of them provide protections from most creditors (including merchants, credit card issuers, and banks) but not from garnishment for child support. For example, state employee pensions and workers compensation can both be garnished for child support.
Kentucky Maximum Threshold
While Kentucky has its own law setting out the maximum amount that can be garnished, this law mirrors federal law; for all practical purposes, the state follows federal law on the subject. Under federal law, the lesser of the following may be garnished:
- 25% of disposable income
- The amount by which a debtor’s weekly income exceeds 30 times the minimum wage
“Disposable income” in this context does not mean what it is usually taken to mean. Almost all income is disposable income for garnishment purposes, since the only thing taken out when calculating disposable income are legally required deductions from a person’s paycheck. The primary legally required deduction is FICA, and all legally required deductions typically add to less than 10% of a person’s income, leaving 90% that could be garnished.
It’s important to note that the 25% threshold is s not 25% of income for each garnishment. It’s 25% total of disposable income that may be subject to garnishment for all creditors or judgments.
Also note that certain debts—for example, taxes and child support—will allow more of a person’s income to be garnished than can be garnished for the majority of consumer or private debts.
Kentucky Statute of Limitations
When creditor has a judgment, the creditor has at 15 years to seek garnishment or otherwise enforce the action. That gives the creditor the luxury of waiting to see if a down-on-his-or-her-luck debtor starts earning more money before garnishing income.
First, the creditor needs to get the judgment, however. That means bringing (and winning) a lawsuit with the time available to sue, called the statute of limitations. This will vary with the type of debt or the cause of action. For the most common consumer debts, the limitation periods are:
- Open accounts (credit cards), oral (or verbal) contracts: 5 years
- Written contracts: 15 years—note that this is about three times longer than the statutes of limitation in most states, giving Kentucky creditors longer to sue
Writ of Garnishment in Kentucky
Garnishment is the second legal proceeding pertaining to a debt: the first one was the lawsuit where the creditor obtained a judgment. In that first proceeding, assuming legal procedures were followed, the debtor had an opportunity to defend him- or herself from the claim that he or she owes money. Since the debtor already had that chance, his or her chance to dispute the debt again during garnishment is greatly reduced, reducing the debtor’s involvement in the process. Garnishment is primarily between the creditor and the garnishee.
Garnishment is court ordered. The creditor uses the judgment as the basis for asking the court to order garnishment. Other than proving the existence of a judgment, the creditor merely needs to allege or state—
- It hasn’t been paid on the judgment
- It thinks that states garnishment is necessary to obtain payment
- It believes that a garnishee—such as the debtor’s employer— has money available which belongs to the debtor (e.g. debtor’s salary or wages), but which can be used to satisfy the creditor’s judgment
The court will serve the garnishee, requiring it to verify that it has money owed or belonging to the debtor. The garnishee cannot challenge or dispute the creditor’s right to garnishment as a remedy. Instead, usually all it can do is challenge any incorrect “facts” relating to the garnishment. For example, the garnishee can show that it pays the debtor less than creditor believes, or that the debtor is no longer employed by the garnishee, or even that it cannot identify the debtor at all from the documentation. Assuming everything is in order, and that the garnishee has money of the debtor which can be used to satisfy a valid judgment, an order will issue requiring the garnishee to turn some of that money over for the creditor’s benefit. More on Stopping Wage Garnishment in Kentucky.
Getting Legal Help
If a debtor is faced with garnishment, he or she should immediately seek legal help. There are some ways in which a debtor can attack a garnishment, such as:
- Challenge the validity of the underlying judgment on which the garnishment is based. If the underlying judgment was already fully litigated, there is often little that can be done at this stage to challenge it On the other hand, if there was some significant procedural defect or flaw (e.g. the debtor never properly received notice he or she was being sued and lost by “default” for that reason), there may be grounds to overturn the judgment.
- Statute of limitations. It may also be possible to attack the judgment or the garnishment as too old, based on the statute of limitations. Given how long the Kentucky statutes of limitation are for written contracts and enforcing judgments, this will rarely be a winning argument in the state.
- Mistake or error. Is the creditor trying to garnish the wages of the wrong person? Did the debtor already pay all or some of the judgment, but the debtor’s payments have not been properly credited?
- Exempt income. Can the debtor show that much of his or her income comes from exempt or protected sources, so the amount that could be garnished is lower? Particularly for retirees, given the protection afforded to pensions, this can be an important way to protect income.
- Other obligations. Is the debtor paying on other obligations (e.g. such as child support), so that the debtor is already “fully garnished” (25% or more of income) and can’t pay anymore?