Debtors who owe money and don't pay can be faced with garnishment: that is when money belonging (or owed) to the debtor which is in the possession or control of a third party, called a garnishee, is ordered to be turned over to a creditor to satisfy a debt. When the garnishee is the debtor's employer, and the money is the debtor's wages or salary, it is called wage garnishment; however, remember that any money in a third-party garnishee's control could be subject to an order of garnishment.
Who issues the order? The courts. Garnishment is a judicial remedy used by courts to enforce monetary judgments, or legal determinations that one party owes another person money. Judgments are an outcome of lawsuits; when one person sues another over a debt, a contract, or some other cause of action and wins, they may be issued a judgment for money, which garnishment can then be used to enforce. (Note: the IRS has a slightly different process for garnishing wages for unpaid taxes.)
There are limits on garnishment. The first limitation is that many forms of non-wage, non-salary income are protected from garnishment. (This is called being exempted from garnishment.) Some exemptions are federal:
Other exemptions are under state law. In
As with Social Security, not all the state exemptions are absolute. Several provide protection from most creditors (including merchants, credit card issuers, and banks), but not from garnishment for child support.
A second limitation on garnishment is that only a portion of otherwise non-exempt income may be garnished.
In calculating disposable income, only payroll deductions required by law (like FICA) are taken out. No other deductions or expenses, no matter how common or necessary they are, are considered—only legally mandated ones. As a result, most income will be considered "disposable."
It's important to bear in mind that tax debts and child support obligations will allow a larger portion of income to be garnished than other debts. There is less protection for debtors facing these obligations than debtors facing other ones.
Before garnishing, creditors first need to obtain a judgment in their favor. This means that they need to successfully sue the debtor, which in turn means they have to commence their lawsuit within the statute of limitations, or time to sue, for that cause of action of debt.
For some of the most common consumer debts, the limitation periods in
After obtaining its judgment, the creditor gets another 5 years (possibly more; renewing or extending the time period for
Before seeking garnishment, the creditor has already overcome the main hurdle—it has proven its debt in a court of law and obtained a judgment. After that, while it needs to go back to court to get an order or writ of garnishment, it doesn't need to go through anything like a lawsuit again. Instead, it goes through a process in some ways similar to that involved in eviction, where it's mostly a matter of just completing the paperwork in the right way, rather than having to litigate anything.
The creditor applies in writing to the court for garnishment. The creditor—
1) Proves that it has a judgment in its favor
2) States that it hasn't been paid on the judgment and therefore believes garnishment is necessary
3) Alleges that some garnishee (e.g. the debtor's employer) has money owed to the debtor which could instead be used to satisfy the judgment
The garnishee will be ordered to verify that it has money belonging or owed to the debtor. If it does not, or has less than the creditor believed, it will have a chance to prove it. Once it is determined that it has debtor's money, assuming that the debtor did not succeed in some challenge to the garnishment (see below), the garnishee will be ordered to garnish debtor's income for the creditor. More on Stopping Wage Garnishment in Nebraska.
The time to have challenged or disputed the debt itself was the prior lawsuit, when the creditor obtained its judgment. However, even without disputing the merits of the debt, there are ways that a debtor, with legal assistance or help, can challenge garnishment:
For more information:
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]