What is garnishment? Garnishment is a way that creditors (people or businesses owed money) can look to collect from debtors (those who owe them money) when the debtors do not pay voluntarily. The most common type of garnishment is wage garnishment, when a portion of a debtor’s salary is diverted for a creditor’s benefit. However, any income or property held by another for the debtor’s benefit, or owed by another to the debtor, can be garnished. (That’s where wage garnishment comes from: the money owed to debtor by his/her employer is garnished.)
Garnishment is a legal proceeding, and except in some specialized, governmental cases (such as the IRS), it requires an order issued by the court system to enforce a judgment, or court order that one party pay another party money. That means that creditors—such as credit card companies—cannot garnish debtors on their own, but instead need to first sue and win in court, to establish the judgment that will form the basis of garnishment.
New Jersey Garnishment Exemptions and Non-Exemptions
Social Security is created by federal law, and under federal law, it is exempt from most garnishment. However Social Security can still be garnished for child support, alimony, federal taxes, and certain other government debts.
Since garnishment in state courts is a function of state law, states determine their own exemptions to garnishment, establishing types of income which cannot be garnished. Remember: “income” is any essentially any payment stream that is not repayment of a loan, and includes pension benefits and annuities, for example, as well as salary or wages.
Not surprisingly for a state which has funded pre-K for the underprivileged, expanded the categories of people protected from workplace discrimination, and makes it difficult to evict tenants living in foreclosed property, New Jersey exempts many different kinds of income from garnishment. The state is very protective of the rights of the individual, especially the downtrodden.
In particular, New Jersey protects—
- Public pensions: most states will protect the pensions of actual state workers, but New Jersey goes further. It also exempts from garnishment the pensions of municipal and county employees generally, as well a number of specifically defined public servants, including teachers, prison employees, alcohol beverage control officers, board of health employees…if you are drawing any sort of public pension from New Jersey or a political subdivision of the state, there’s an excellent chance it’s protected. However, for those in the private sector, the news is not nearly so good, and it appears that private retirement benefits are not exempt from garnishment.
- Public benefits or assistance: workers’ compensation, unemployment insurance, crime victim compensation, and aid to the aged and disabled are all protected from garnishment.
- Insurance and annuities: annuity benefits, up to $500/month; group health or life benefits; military disability or death benefits; and life insurance proceeds in many cases (e.g. if the policy says the proceeds can’t be used for creditors; or if the debtor was not the insured).
New Jersey Maximum Threshold
There is a federal law which sets a ceiling or cap on the maximum amount of income that can be garnished; it’s the lesser of the following:
- 25% of disposable income
- The amount by which a debtor’s weekly income exceeds 30 times the minimum wage
In common usage, “disposable income” is income left over after required expenses, including food and housing—it’s the money left over for entertainment or savings. For garnishment purposes, however, disposable income is income left after legally required paycheck deductions, such as withholding, FICA, unemployment contributions, and state employee retirement contributions. Most of a person’s income will therefore be “disposable income.” For a debtor making considerably over minimum wage, assume that around 25% of 90% of income could be garnished. (Not 25% of income for each garnishment; a total of 25% of disposable income may be garnished for all creditors or debts.)
Note however that the 25% rule is for most debts. For certain debts, like tax obligations and child support, more of the debtor’s income can be garnished. Up to 50 % - 60% of a debtor’s income could be garnished for child support, depending on circumstances.
Overriding the above is that to allow lower-income debtors something to live on, the debtor can keep at least the equivalent each week of working at least 30 hours at minimum wage.
That’s federal law. States can go further, and allow less of a debtor’s wage to be garnished (they cannot weaken federal protection and allow more).
That’s what New Jersey does, at least for lower-income debtors. Under New Jersey law, unless a debtor is earning more than 250% of the poverty level, only 10% of his or her gross can be garnished; if he or she is earning more than that, New Jersey courts have discretion to allow greater garnishment (up to federal limits).
New Jersey Statute of Limitations
Always remember that there are two statutes of limitation affecting any garnishment. The first is the statute of limitations—or time to bring a lawsuit—for the debt on which garnishment is based. That varies with the type of debt or cause of action, but common ones for consumer debts are:
- Written contracts: 6 years
- Oral/verbal contracts and open accounts (credit cards): 6 years
Remember: it it’s too late to sue, it’s too late to garnish.
If a creditor has previously sued and received a judgment in the creditor’s favor, the creditor has up to 20(!) years to act on judgment. That means that a creditor can wait two decades, to see if the debtor gets into a financial position where it’s worth garnishing wages.
Writ of Garnishment in New Jersey
Since garnishment comes after the creditor has received a favorable judgment, the debtor has already had or her day in court. If the debtor still doesn’t pay, the creditor applies in writing for garnishment to enforce the judgment, stating:
- Money is due the creditor
- Garnishment is believed necessary for the creditor to be paid
- The debtor’s employer (the “garnishee”) has money available and owed to the debtor (e.g. debtor’s salary or wages)
- The money in garnishee’s possession can be used to satisfy the debt
Paperwork (often called a “writ”) will then be served on the. The garnishee can try to challenge the garnishment on a factual ground, such as by showing that it pays the debtor less than what creditor believes, or that the debtor is no longer employed, or that garnishee cannot identify the debtor from the documentation. However, it cannot challenge the creditor’s right to have debtor’s wages garnished. More on Stopping Wage Garnishment in New Jersey.
Getting Legal Help
When faced with garnishment, immediately seek legal help. There are ways to attack a garnishment, such as by attacking the validity of the underlying judgment on which the garnishment is based. Of course, if the judgment was fully and properly litigated, there is little that can be done at this stage to challenge it. On the other hand, if the judgment was rendered incorrectly, such as by “default” when the debtor had not received proper notice, there may be grounds to overturn it. Another option is to attack the underlying debt or the garnishment itself as too old, based on the statute of limitations. (New Jersey’s long statutes make this problematic, however.)
Another option is to show that debtor’s disposable income is lower than calculated, reducing the amount available for garnishment. This can be done by showing that other obligations, such as child support, have the debtor already “fully garnished” so he or she can’t pay anymore; or by showing that large portions of the debtor’s income comes from non-wage, non-salary sources that are exempt from garnishment.
For more information:
New Jersey Statutes[http://lis.njleg.state.nj.us/cgi-bin/om_isapi.dll?clientID=201066875&depth=2&expandheadings=off&headingswithhits=on&infobase=statutes.nfo&softpage=TOC_Frame_Pg42]
FAQ sheet about Federal garnishment rules[http://www.dol.gov/whd/regs/compliance/whdfs30.pdf]
Social security and garnishment[http://www.ssa.gov/deposit/DDFAQ898.htm]