Garnishment is a remedy available to creditors, to allow them to collect from debtors who do not voluntarily pay. It is when a court order is sent to a third party, called a “garnishee,” which has possession or control of some of the debtor’s money; the garnishee is ordered to send at least a portion of that money to the creditor, to pay off the debt. One particular kind of garnishment is wage garnishment, which is when part of the debtor’s wages or salary is sent to the creditor.
As a general matter, a creditor needs a court order to garnish wages. To get that court order, it needs a judgment in its favor. That means that the creditor has to first sue the debtor and win, thereby establishing a legally enforceable right to the money. (The exception is certain tax authorities, like the IRS, which do not need to sue first.)
Garnishment is available for any debt, whether arising out of consumer transactions or credit cards, contracts or promissory notes, taxes, alimony or child support, or even tort (e.g. lawsuits arising from accidentally caused injury or professional misconduct).
Social Security is established by federal law, and under federal law, it is mostly (though not completely) exempt from garnishment. Social Security income can be garnished for child support, alimony, and debts owed to the federal government (principally taxes), but nothing else. Tennessee goes further than federal law, however, and completely exempts social security from garnishment.
In addition, states may create additional exemptions to garnishment; that is, they may protect certain types of income from being garnished. Tennessee has gone ahead and exempted more types of income than most other states. Many kinds of non-wage, non-salary income are protected from garnishment, including:
There is an excellent chance that non-wage, non-salary income is protected in Tennessee, particularly insurance, retirement, or public benefits.
Even for non-exempt income, not all the income can be garnished. Instead, the law will specify that a certain portion is exempt from garnishment. Tennessee essentially follows federal law for determining the maximum amount garnished. The lesser of—
—may be garnished. The idea is to make sure that the debtor is left with enough to live on. Be aware that for garnishment purposes, “disposable income” will be almost all a person’s income: it is income left after legally required payroll or paycheck deductions, such as FICA, are taken out. Only legally required deductions, not deductions under workplace or union rules, or other necessary expenses, are considered.
There are two wrinkles to the above:
Tennessee increases the weekly exemption by $2.50 per week per dependent child (does that represent a judgment by the state that it only takes around $125 a year to feed, clothe, and house a child?)
Tax and child support debt allow greater garnishment, up to 50% or even more of a person’s income
A statute of limitations is the time to bring a lawsuit or to enforce a judgment. The first kind of statute (for suing) will vary by the cause of action. Common statutory periods for consumer debts in Tennessee are:
(Many states draw a bigger distinction between oral and written contracts than Tennessee.)
This is important because the creditor has to first sue, win, and obtain a judgment before filing for garnishment.
Once the creditor has a favorable judgment, it then gets another 10 years to enforce it, including by garnishment. Since the creditor sued because the debtor didn’t pay, and the debtor probably didn’t pay because the debtor didn’t have money, this gives the creditor an opportunity to see if the debtor gets on good-enough financial footing that it is worth taking action.
Before seeking garnishment, the creditor has already won in court: the debtor has already had an opportunity to defend him- or herself against the claim that the debtor owes money—i.e. already had an opportunity to challenge that claim and lost.
The debtor’s involvement in garnishment is therefore minimal, since the creditor’s claim has already been established. The garnishment process involves the creditor, based on its judgment, applying for garnishment. In its application to the court, the creditor states that money is due on the judgment; garnishment is necessary to enforce the judgment; and a garnishee (such as the debtor’s employer) has some of debtor’s money (e.g. debtor’s salary or wages), which can be used for the debt.
Documents are then served on the garnishee, requiring the garnishee to answer and verify that it has some of the debtor’s money. (The garnishee can be required to come in to court and answer in person.) While the garnishee can challenge incorrect facts or assertions—
—it cannot challenge its obligation to garnish money for the creditor, based on a valid judgment, if the facts are otherwise correct. Therefore, unless the debtor can make a successful challenge (see below), it is very likely that garnishment will be ordered. More on Stopping Wage Garnishment in Tennessee.
A lawyer can help a debtor challenge a garnishment. If the underlying judgment was completely and properly litigated previously, and if there is no mistake being made in the garnishment, then the main opportunity to challenge the garnishment will be based on some aspect of legal procedure, such as whether the garnishment is being brought in time, or whether the garnishment process is being complied with.
In addition, the debtor can try to show that much, most, or even all of its income is derived from exempt sources, and so not subject to garnishment. Given the number of exemptions in Tennessee, especially for the disabled, out of work, and retirees, this can be a very important tactic.
If there were substantial errors in the garnishment (such as the wrong person being named; or credit not being given for payments previously made on the debt), or in how the judgment had been granted (such as debtor had not had a proper opportunity to defend itself, because it was never given notice of a lawsuit), those can provide fruitful grounds for a challenge as well.
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]