Court judgments for money—orders that one party has to pay another—create legally enforceable debts. Once someone has sued on a contract, a promissory note, a consumer debt, or some other cause of action and won, that person now has a legal right to be paid. Of course, just because the creditor has a legal right to payment doesn’t always mean the debtor will pay; but when the debtor does not, there are several mechanisms or procedures by which the creditor can collect.
One of those mechanisms is garnishment, in which the creditor uses the judgment to obtain a court order directing a third party (called a “garnishee”), which has possession or control over some of the debtor’s money, to turn that money over for the creditor’s benefit. A bank account, private pension benefits, wages owed…any source of type of debtor’s funds in the garnishee’s possession can be garnished. When the money is owed for wages or salary, it is called wage garnishment, and it is perhaps the best known kind of garnishment. While there are a very few states which do not allow wage garnishment, South Dakota is not one of them—garnishing a debtor’s wages is one way a creditor can seek payment of a judgment debt.
South Dakota Garnishment Exemptions and Non-Exemptions
Under federal law, Social Security (which, after all, is a federal program) may only be garnished for child support, alimony, and certain federal debts, especially income tax.
States may carve out other exemptions, or sources of income that are also protected from garnishment. South Dakota has chosen to protect fewer types of income than most other states, leaving more income potentially available for garnishment.
The exemptions the state does allow break down into four main categories:
- Pensions: retirees from the private sector are out of luck, since South Dakota only protects state and municipal employee pensions.
- Public benefits or assistance: a very few types enjoy protection form garnishment: workers’ compensation; unemployment benefits; and aid to families with dependent children.
South Dakota protects far fewer types of public benefits or assistance than most states.
- Insurance benefits or annuities: the one area where South Dakota is fairly generous. Subject to some maximum amounts or caps, the state protects annuity benefits, and health and life insurance proceeds in many contexts. Someone faced with garnishment who has income from these sources would be well advised to consult with an attorney to see how much of his or her income may be exempt.
South Dakota allows the lesser of the following amounts be garnished:
- 20% total of disposable income; “disposable income” for this purpose is non-exempt income, after FICA and any other legally mandated (though not including employer mandated) payroll deductions
- The amount by which a debtor’s weekly income exceeds 40 times the minimum wage
This is more generous to debtors than federal law, which allows up to 25% of disposable income, or the amount by which weekly income exceeds 30 times minimum wage, to be garnished. Note, though, that there are certain debts, such as child support, for which more can be garnished: up to 60% of a debtor’s income.
Also note that is definition of “disposable income” ignores necessary expenses—like food, housing, utilities, and transportation—that people commonly consider when calculating their disposable income. Only legally mandated paycheck deductions matter.
Statute of Limitations
Before garnishing, a creditor needs a favorable judgment on the debt or claim. The creditor must therefore have brought (and won) a lawsuit on the debt within the statute of limitations, or time to sue. Different claims or causes of action may have different statutes of limitation, though many of the common consumer debts share a 6-year statute of limitations in South Dakota: contracts (written and oral), open accounts (credit cards), and promissory notes. The other main type of consumer action, growing out of the sale of goods, has only a 4-year statute of limitations, which is more favorable to debtors.
Once it’s won a judgment, the creditor has another 10 years (for a judgment rendered by a non-South Dakota court) or 20 years (on a judgment from a South Dakota court) to apply for garnishment. The ability to wait increases the chance that the debtor—who presumably was impoverished or insolvent when it defaulted on its debt—will get into a better financial position, making efforts to collect on the judgment worthwhile.
Writ of Garnishment in South Dakota
In many ways, obtaining garnishment is like evicting someone—a streamlined court procedure is needed. As with eviction, assuming that the underlying issues are clearly in the favor of the party seeking the remedy, the process is quick, fairly inexpensive, and almost certain.
For eviction, that underlying issue is the tenant’s right to possess or occupy the space; if the lease is up, or the tenant has violated the lease, he or she no longer has that right and evicting the tenant is mostly a matter of doing the correct paperwork in order to get a court order. It’s the same way with garnishment: if the creditor’s judgment awarding money was obtained the right way and is valid, then garnishment is mostly just a matter of paperwork. This also means that if the underlying judgment is valid, the debtor is limited in his or her ability to challenge or dispute garnishment—they already had their chance previously, during the litigation that resulted in the judgment.
To get an order (often called a writ) for garnishment, the creditor applies for one to a court. In the written application, the creditor states that it has a judgment for money and also that—
(1) it hasn’t been paid
(2) it believes that garnishment will be necessary to secure payment
(3) it believes that a named garnishee (such as the debtor’s employer) has money for the debtor (such as the debtor’s salary or wages) which can be applied to pay the debt
Again, assuming that the creditor’s judgment is valid—in other words, that was properly granted, following correct and fair legal proceedings—the debtor will have comparatively little involvement in the garnishment. Instead, garnishment is mostly between the creditor and the garnishee, which will be required to verify that it has the debtor’s money. If the garnishee does, it will be ordered to turn over some of that money to pay the debt to creditor. More on Stopping Wage Garnishment in South Dakota.
Getting Legal Help
If faced with garnishment, a debtor should seek legal assistance. There are several ways that a lawyer can a debtor challenge—or at least reduce—a garnishment. For example:
- If the underlying judgment was not rendered or granted improperly, it may be possible to overturn it or set it aside. This might happen if the debtor had never actually been served with the papers for the previous lawsuit, so that the creditor only won by “default” because the debtor had never had the chance to defend him- or herself. Other problems with the judgment could include the statute of limitations for the lawsuit, or the awarding court’s jurisdiction (or more precisely, lack of jurisdiction) over the debtor.
- Obviously, if there is a factual error with the garnishment, it could be challenged—such as if the wrong debtor is named, or the size of the debt is incorrect.
- It may be possible to challenge the garnishment on procedural grounds, such as how the creditor applied for it and what kinds of notice have been provided, or if the judgment is so old that the statute of limitations has passed.
- It may be possible to show that the debtor’s disposable income is lower than thought—for example, because the debtor’s income comes from exempt sources. Reducing the disposable income reduces the amount that could be garnished, though South Dakota’s relative paucity of exemptions makes this more difficult than in many other states.
For more information:
South Dakota Statutes[http://legis.state.sd.us/statutes/TitleList.aspx]
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]