Vermont Wage Garnishment Laws

What is "garnishment"? It's a legal process that is used to enforce monetary judgments, or court determinations that one party (a debtor) owes another party (a creditor) money. Monetary judgments are what results when one party sues another and wins; they can be the result of litigation over domestic matters (e.g. alimony, child support), consumer debt (e.g. sale of goods, credit cards), contracts, promissory notes, or negligently or intentionally causing injury to another. A legal obligation to pay can also be imposed by a tax authority, like the IRS, for nonpayment of taxes.

Garnishment is when money belonging to the debtor, but which is under the control or in the possession of a third party, is ordered paid not to the debtor, but instead to the creditor to satisfy the judgment. When that third party, or garnishee, is the debtor's employer and the money is the debtor's wages, it is called wage garnishment, but any source our income (including rent, royalties, pension benefits, etc.) or any other money in the hands of another (such as bank account) could be garnished if it is not somehow exempted or protected from garnishment.

Vermont Garnishment Exemptions and Non-Exemptions

Fortunately for debtors, not all income can be garnished. A number of types of non-wage, non-salary income are protected from garnishment, such as under either federal or law—

• Social Security: under federal law, it is can't be garnished other than for child support, alimony, and certain debts to the federal government, like taxes; Vermont law builds on that, and makes Social Security not subject to garnishment (even for those purposes) to the extent it's actually needed for the recipient's support.

• Pensions and retirement benefits: Vermont offers very broad protection for retirement benefits and pensions, protecting state and municipal employee pensions, teacher pensions—even private pensions, which is unusual and generous. It also protects IRAs and similar accounts, up to a certain amount.
• Public benefits and assistance: there are many exemptions, such as for unemployment compensation, worker's compensation, veteran's benefits, aid to families with dependent children, crime victims' compensation, and aid to the blind, disabled, and aged.
• Insurance and annuities: Annuities to $350 per month; disability benefits, to the amount necessary for support; fraternal society benefits; and life insurance under many circumstances.
• Wrongful death and bodily injury awards: bodily injury awards for the debtor, or wrongful death awards for someone the debtor was dependent on, enjoy some protection from garnishment.

However, note that many of these exemptions are not complete or absolute. For example, private pensions can be garnished for child support; also a number of different benefits (e.g. Social Security, crime victim's compensation, and veteran's benefits, are protected only up to the level or amount the debtor and debtor's dependents need for support.

Vermont Maximum Threshold

In addition to specific income exemptions, only a portion of non-exempt income may be garnished. Vermont's law setting out maximum garnishable amounts is more protective of debtors than is federal law. Under Vermont law, the lesser of the following may be garnished:

• 25% of disposable income; or only 15% if for debts from consumer credit transactions
• The amount by which a debtor's weekly income exceeds 30 times the minimum wage; or 40 times, in the case of consumer credit transactions
• If the weekly expenditures required for the maintenance (i.e. actual living or support expenses) of the debtor and any dependents of debtor require that more income be exempt from garnishment than would otherwise be the case from the two criteria above, than the court may make more income exempt and allow less to be garnished

For determining disposable income, take out from the debtor's gross income only payroll deductions required by law (such FICA). No other expenses or deductions, even necessary ones, will be considered in determining how much income could be garnished. That means that most of a debtor's income will usually be considered "disposable."

Vermont Statute of Limitations

Before they can garnish a debtor's wages, creditors need a court judgment in their favor. Therefore, they need to sue (and win against) the debtor, which means they have to bring a lawsuit within the statute of limitations (time to sue) for that cause of action or debt.

For some common consumer debts, the Vermont limitation periods are the same:

• Open accounts (credit cards), oral (or verbal) contracts: 6 years
• Written contracts, promissory notes: 6 years

After obtaining a judgment, a Vermont creditor gets another 8 years to enforce it, such as by seeking garnishment of the debtor's wages.

Writ of Garnishment in Vermont

In order to garnish a debtor's wages, a creditor does not need to prove or litigate the debt—that's been done already, when the creditor obtained the judgment in its favor. Instead, the creditor merely needs to apply for garnishment to the court, stating that it believes that garnishment is necessary to satisfy a judgment which the debtor has not been paying. In its application, the creditor needs to allege that the garnishee (e.g. the debtor's employer) has money belonging or owed to the debtor (e.g. wages or salary) which could be applied to the debt.

The garnishee will be examined and will be required to verify the amounts, if any, owed the debtor. Assuming it does have debtor's money (and if it doesn't, the garnishee will have an opportunity to show that it doesn't) and that the debtor cannot mount a successful legal challenge, garnishment will be ordered. More on Stopping Wage Garnishment in Vermont.

Getting Legal Help

Remember, garnishment occurs after the creditor already has a monetary judgment. That means that—if legal procedures were properly followed—the debtor already had a chance to dispute the debt (and lost). That limits the debtor's ability to challenge the merits or substance of the debt, since that has been determined already. Even without doing so, however, there are ways a debtor and its attorney can challenge garnishment:

• If the judgment had been granted improperly, it may be possible to overturn it. An example would be if the debtor had never been properly served papers for lawsuit that led to the judgment, leading the creditor to win "by default" when it shouldn't have.
• If the original garnishment—or, for that matter, the lawsuit on the debt or cause of action—was or is being brought too late, it might be barred by one or another of the states' statute of limitations.
• If the garnishment process is not being followed properly, that provides grounds to challenge it.
• If there's an error or mistake in the garnishment—such as the wrong debtor being named!—that would obviously provide a basis for attack.
• To the extent a debtor's income can be shown to be exempt, it is not subject to garnishment.
• If the debtor and his/her dependent's need most of the debtor's income for support, that could exempt most or all income from garnishment.

For more information:

Vermont Revised Statutes[http://www.leg.state.vt.us/statutes/statutes2.htm]
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]