Garnishment is a way that creditors can recover money from a debtor who won’t pay them voluntarily. It involves getting an order requiring someone who has debtor’s money or property (like a bank) or who owes debtor money (like his employer, for debtor’s wages, or a pension plan) to turn that money over to creditor. The most common kind of garnishment, which most people think of as synonymous with garnishment, is wage (or salary) garnishment, but any property or debt in the possession of a third party is fair game.
Garnishment is used to enforce a judgment, or a legal determination that a debt exists. A creditor cannot establish that there is a debt just by saying or insisting so; the creditor needs to prove it in a court of law, by suing debtor on the debt and winning. (There are some limited exceptions, such as for the IRS, where no prior court action is necessary; but private debtors need to litigate first.)
Garnishment is controlled by state law—it is a state process, happening in state court. While there are certain federal (or national) laws which will provide a basic framework for all garnishment, each state is free to set many of its one rules, such as what types or amount of income may be garnished. The one restriction is that while states may be more protective of the debtor than federal law, they may not be less—federal law establishes a floor of minimum protection.
New York Garnishment Exemptions and Non-Exemptions
Remember, federal law sets a minimum floor. That’s why, for example, income from Social Security (a federal program) is mostly exempt from garnishment. It can be garnished only for alimony, child support, and certain federal debts (such as IRS tax debts).
New York, like other states, has carved out a number of exemptions from garnishment for non-wage, non-salary sources of income, such as:
- Pensions: New York affords pension benefits broad protection, exempting in various ways IRA’s, Keoghs, and 401(k)s; private pension plans registered with the state (for any lucky enough to still have them!); and state worker pensions. In some cases, the protection may be for the money while it’s in the plan or account, not for its distribution, so if you have income coming to you from these sources but are faced with garnishment, you should consult with an attorney to determine any liability or exposure you may face.
- Some insurance or annuity benefits: disability or illness benefits; annuity benefits; life insurance proceeds in many contexts or circumstances (such as if the policy itself says that its proceeds may not be used for creditors)
What about public assistance or benefits, such as worker’s compensation, aid to the aged, blind, or disabled, aid to families with dependent children, etc.? New York provides extensive protection for these in bankruptcy, but not necessarily from garnishment in other cases. This goes to show that every legal proceeding is different, and you can’t rely on a rule or exemption from one applying to another. (See more on what wage garnishment exemptions are allowed in New York).
New York Maximum Threshold
Under New York law, only up to 10% of gross income can be garnished (similar to New Jersey’s rule). This is much better than the “baseline” federal rule of 25% of disposable income, since the way “disposable income” is defined, most income is disposable; only legally mandated deductions, like FICA, are taken out when determining disposable income.
However, federal law does provide a minimum amount of protection to low-income debtors. Garnishment is only possible for the amount by which a debtor’s weekly income exceeds 30 times the minimum wage, which guarantees a debtor the equivalent each week of working at least 30 hours at minimum wage—it’s not a lot, but it’s something to live on.
New York Statute of Limitations
Once a creditor has a judgment, New York gives the creditor a very L-O-N-G time to enforce it: 20 years, or two decades! This allows the creditor to wait a long time to see if debtor’s financial position improves, making enforcement worthwhile.
However, even before getting to that 20-year-term, the original or underlying action which gave rise to the judgment must have been brought in a timely manner. In New York, for the main consumer debts—whether arising from a written or verbal (oral) contract, a promissory note, or credit card—all have 6 year statutes of limitation. That means the creditor has 6 years from the default—when debtor stopped paying (not from when the contract was signed, note taken out, etc.)—to bring a lawsuit to collect. If creditor waited too long to sue, creditor no longer has the option to garnish.
Writ of Garnishment in New York
The debtor is not directly involved in garnishment to any great degree. That’s because garnishment is between the creditor and the one owing debtor money, such as debtor’s employee (the “garnishee”). This makes sense when you think about it: since garnishment comes after the creditor has already obtained a judgment against debtor, debtor has already had an opportunity to defend him- or herself.
Armed with its judgment, creditor applies in writing for an order garnishing debtor’s income. Creditor must state that money is owed it; garnishment is necessary for creditor to collect; and that garnishee has money available which is owed to debtor (salary or wages), which can be used to satisfy the debt.
An order will served on garnishee, and while garnishee can challenge factual elements (such as what it pays debtor, or whether debtor is even employed there), it cannot challenge creditor’s basic right to have debtor’s wages garnished for creditor. More on Stopping Wage Garnishment in New York.
Getting Legal Help
It’s a good idea to seek legal help when faced with garnishment. There may be ways to attack a garnishment. One possibility is to challenge the judgment on which garnishment is based, though if the underlying issue was already fully litigated, there is often little that can be done to challenge it at this point. However, if the judgment was granted improperly—
- e.g. by “default” when the reason for default was that the debtor had not been given proper notice
- or when the statute of limitations had already passed
—there may be grounds to set it aside.
Another option is to show that debtor’s disposable income is less than calculated or believed, so that less can be legally garnished. This can be done by showing that debtor’s other obligations, such as child support, have resulted in him already paying as much as he legally be required to pay; or that significant portions of debtor’s income are exempt from garnishment.
For more information:
New York Consolidated Laws[http://public.leginfo.state.ny.us/MENUGETF.cgi?COMMONQUERY=LAWS+&TARGET=VIEW]
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]