When a debtor does not pay a creditor on a legally enforceable debt—such as one for which the creditor has a court judgment in its favor—the creditor can use garnishment to obtain payment. Garnishment is when the creditor obtains an order requiring some third party, called a garnishee, to turn over to it money in the garnishee’s possession which belongs to the debtor. For example, in one of the most common and best known types, wage garnishment, the garnishee is the debtor’s employer and the money belonging to the debtor is his or her wages or salary. The garnishee will, under the writ or order of garnishment, send part of the debtor’s wages or salary to the creditor, to satisfy the debt.
Garnishment is available for any debt—not just consumer debts, or debts from loans or promissory notes, but also ones resulting from a lawsuit, a divorce (e.g. alimony and child support), or taxes.
Some types or sources of income are made exempt from garnishment by either federal or state law. For example, Social Security is exempt from garnishment. Under federal law, it can only be garnished for a very few domestic (alimony and child support) or federal (mostly taxes) debts.
In addition, in Maryland, several other types of non-wage, non-salary income are protected from garnishment as well:
Maryland has two different systems for calculating the maximum amount of garnishment. If the debtor is in Caroline, Worchester, Kent, or Queen Anne’s counties, federal law applies. The lesser of the following may be garnished.
Everywhere else, including Maryland’s most populous counties, it’s the lesser of:
Since 30 hours at minimum wage is more than $145 per week, the state gives low income debtors more protection (more of their wage is exempt) in Caroline, Worchester, Kent, or Queen Anne’s counties than elsewhere in Maryland.
When defining “disposable” income for garnishment purposes, bear in mind that only after legally required payroll or paycheck deductions are excluded from income. (For example, FICA.) No other deduction and no other expense is considered. Most of a person’s income will therefore be considered “disposable income” for garnishment purposes.
Also bear in mind that certain debts, like taxes or child support, will allow much more of the debtor’s income to be garnished. The 25% maximum threshold is for most debts, but there are exceptions.
There are two statutes of limitation (time to take legal action) relevant to garnishment. That’s because except for tax debts, garnishment is effectively a two-step process: first the creditor needs to get a court determination, or judgment, that the debtor needs to pay; then seek garnishment.
The first relevant statute of limitations is the one for the underlying debt on which garnishment will be based. In Maryland, for the most common causes of action (e.g. written or verbal contracts; credit cards) it’s 3 years.
The second relevant statute of limitations is for enforcing a judgment. In Maryland, the creditor has at least 12 years to seek garnishment or otherwise enforce the action. That gives the creditor the luxury of waiting until a down-on-his-or-her-luck debtor is earning more money before garnishing that income.
In brief, the process is—
1) Creditor obtains a judgment
2) If the debtor doesn’t pay, creditor applies for garnishment in order to collect on the debt
3) In its application, the creditor cites its judgment and the debtor’s failure to pay; states that it believes garnishment is necessary; and alleges that a garnishee (e.g. the debtor’s employer) has money belonging to the debtor (e.g. salary or wages) and which could be used to pay the debt.
4) The garnishee will be required to respond and verify that it has (or does not have) money belonging to the debtor.
5) If the garnishee has debtor’s money, and that money is not from an exempt source (and note: wages and salary are never exempt), it will be ordered to turn over at least a portion of it for the creditor. More on Stopping Wage Garnishment in Maryland
With a lawyer’s assistance, it may be possible to challenge, or at least reduce, garnishment. There are several different tactics or strategies which can be followed, though re-arguing or re-litigating whether or not the debtor owes the creditor money is rarely one of them—this should have settled during the earlier litigation, which resulted in the creditor’s judgment.
One possibility is to attack the validity of the underlying judgment on the grounds it had been rendered incorrectly, such as by “default” when in fact the debtor had never been given proper notice or a chance to defend itself. It may also be possible to attack the judgment as having been granted in violation of the statute of limitations, especially given how comparatively short Maryland statutes of limitation are for most common causes of action.
The garnishment itself can also be attacked on procedural or statute of limitation grounds.
Another possibility is to show that the calculation of the debtor’s disposable income is wrong. For example, if some of the debtor’s income comes from exempt non-wage sources—such as insurance proceeds, public benefits, or certain pensions—that income should not be included in determining disposable income.
If the debtor has other obligations, such as child support, it may be possible to show that the debtor is already being garnished at or near the maximum rate and cannot have more income garnished.