When a creditor can’t collect on a judgment in its favor, there are several procedures or mechanisms it can use to get money from an unwilling debtor. One mechanism is called garnishment, and it is when the creditor gets a judicial order directing a third-party garnishee to turn over for the creditor’s benefit money belonging (or owed) to the debtor which is in the garnishee’s possession or control. When the garnishee is the debtor’s employer, and the money is wages or salary owed to the debtor, the process is called wage garnishment. It’s important to remember, though, that garnishment can apply to any income, not “just” that from working: rental receipts, public assistance, a structured settlement, and retirement benefits, for example, are all types of income that could be garnished, unless there were made exempt from garnishment.
So what kinds of income are exempt from garnishment? Not wages or salaries, though many non-wage, non-salary incomes are protected, at least partially, from garnishment.
Note, though, that several of these exemptions or protections are not absolute or complete. It is not uncommon to be able to garnish them specifically for “domestic” debts, such as maintenance or child support. For example, firefighter and police pensions, and crime victim compensation, may be garnished for this purpose.
Even when some source or type of income (like wages or salary) is not exempt from garnishment, it can still only be garnished up to a maximum amount or level. Rather than put out its own limits, Montana has chosen to follow federal law. The lesser of the following may be garnished:
There are exceptions to the above: the 25% threshold may be for most debts, but federal law allows up to 50% (or more) of a debtor’s income to be garnished for taxes or child support.
Most garnishments are a two-step or –stage process. (Tax debts follow slightly different rules.)
First, the creditor needs a favorable court judgment, which establishes the debtor’s obligation to pay it. This means bringing a legal action within the appropriate time period for the type of debt or claim. The time to sue, or statute of limitations, is different for different causes of action, but for some common consumer causes of action, Montana allows 5 or 8 years to sue:
Second, the creditor must go back to the courts for garnishment. Montana gives a creditor at least 6 years (possibly more; renewing or extending the time period is possible) after obtaining a judgment to seek garnishment.
The garnishment proceeding is not the time to litigate the underlying debt—that was earlier, when the creditor first sued the debtor and obtained a judgment in its favor. Garnishment instead should be a fairly simple, streamlined process for enforcing a previously determined legal right. The creditor applies to the court for judgment, based on an unpaid judgment; as part of its application, it identifies a garnishee (or possibly more than one garnishee) which the creditor believes has money belonging or owed to the debtor. The garnishee will be contacted, and given a chance to dispute the factual assertion (e.g. that it owes a certain amount of money to the debtor) that forms the basis for creditor’s attempt to garnish from it. If the creditor was right and garnishee does have money in its possession that could be used to satisfy creditor’s judgment, the garnishee will usually be ordered to start putting aside some of what it owes the debtor for the creditor’s benefit. The whole process can usually be resolved in a few weeks, which is light speed compared to how long most legal actions take. More on Stopping Wage Garnishment in Montana.
Good legal assistance can be the difference between paying an unwarranted garnishment or not. Even though, as mentioned above, it is usually too late to re-argue debtor’s basic financial obligation to the creditor (the time to do that was the earlier litigation), it is still possible to challenge a garnishment that—
It may also be possible show that much or most of the debtor’s income comes from exempt or protected sources. This will reduce the amount of disposable income, which in turn will reduce the amount that could possibly be garnished. In addition, if debtor is facing multiple garnishments, it may be possible that the debtor’s income is already being garnished to the greatest extent legally possible, leaving nothing for the new action.
For more information:
Montana Code (state statutes) [http://data.opi.mt.gov/bills/mca_toc/index.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]