Can Debt Collectors Garnish Wages or Bank Accounts?

May 14, 2019

Can Debt Collectors Garnish Your Bank Accounts or Wages? What Should You Do about it?

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Can your bank accounts be garnished by a debt collector? What about wages? Here are some things you need to know about garnishment.

If you have assets, and this includes either a job or money in the bank, you must be concerned about the possibility of being garnished if a debt collector (or anybody else) has a judgment against you. In other words, the short answer to our question about whether your wages can be garnished is YES. Wages can be garnished once a debt collector has a judgment against you.

Bank accounts can also be garnished when there’s a judgment against you.

The Surprise that Isn’t a Surprise

Lawsuits are divided into two main parts. The first part, which is what everyone thinks about in connection with “being sued,” is a determination of liability and damages. In plain English, the lawsuit is to decide whether you owe anything and how much. In debt cases, that’s usually determined by either a default (failing to show up to court in the first place) or “give-up settlements” (where you show up to agree to anything the debt collector wants, which often includes a “consent judgment”). That judgment just says you owe x-amount of dollars, or nothing, as the case may be.

In most cases, judgments are not “self-enforcing.” That means that after the debt collector gets a judgment that you owe some money, it must still either persuade you to give it to them or find it and take it away from you. This is called “enforcing a judgment,” or in plain language: “collection.” To do that, the debt collector tries to find your assets and then goes to the court’s garnishment office and starts garnishment proceedings.

The garnishment office does NOT tell you they’re at work, and neither does the debt collector. They want you to forget about the case and get comfortable. If you move or hide your assets, their job gets much, much tougher. And if they warn you they are at work, you’re more likely to move or hide the assets, right?

Incredibly, people are quite often shocked when the debt collector starts seizing assets, freezing bank accounts, or garnishing assets.

They are at Work

Let this be your warning. If they have a judgment against you, THEY ARE AT WORK. They still want your money, and they’ve taken a big and somewhat expensive first step by suing you. Why would they stop? You may forget about it, but they won’t.

The Way it Happens

You are always the last to know when collection activity happens. This way your funds are frozen before you can take any action such as withdrawing all your funds.

Banks

The debt collector serves a notice of garnishment on the bank, and as of the time the bank receives it, your account will be frozen. Their notifying the bank first is perfectly legal.

You typically receive the notice (including your rights) a day or two, or three, or four… after your funds have been frozen. In most states, the garnishment does not only freeze funds already in your account at the time of service on the financial institution, but can get money you put in afterwards for a period of time.

During the time the garnishment is in effect, the financial institution cannot honor checks or other orders for the payment of money drawn against your accountif it would leave a balance under the amount stated on the garnishment. For most people, this means any outstanding checks will more than likely bounce or be returned for NSF.

When the amount being garnished is paid, the freeze on your account must be terminated, but since many people do not have nearly enough money in their accounts to offset any significant judgment, this is not of practical significance. If they catch you by surprise, you probably have big trouble. Not only is your money gone, but checks (and automatic drafts, for example) are bouncing right and left – and there are other laws that punish you for that.

Jobs

Wages can also be garnished, and, again, your first notice that you are being garnished is likely to be when you receive a check that is less than you thought it would be.

Federal law limits the maximum amount that can be garnished by one or more garnishment orders to 25 percent of your disposable earnings for that week, or the amount by which your disposable earnings for that week exceed thirty times the Federal minimum hourly wage, whichever is less.

In practical terms, that means (as of this writing) that if you make $154.50 or more per week your wages will be reduced by about 25%. Since most people being sued for debt are already close to the line, a 25% reduction in their paychecks can be simply devastating. And remember, you won’t find out about it until the money is gone.

Don’t Let them Get a Judgment

All of the above means that you should work HARD to avoid letting the debt collector get a judgment. If they do manage to get one, you should EXPECT NOT ONE SHRED OF MERCY. They will take every penny they can with no concern at all for the consequences to you or your family.

Sometimes people think that things are so hopeless that it isn’t worth it to try to keep them from getting a judgment. You have nothing now for them to garnish, and you don’t expect ever to have enough for them to garnish. That’s called being “judgment proof.”

Don’t go there. Things could get better for you in any number of ways, from your job suddenly turning better, to people you don’t know dying or giving you money, or you getting some sort of great idea, or… just anything. The world is full of possibilities, and good things could happen. They’re much more likely to happen if you keep looking for them, too.

It isn’t all that hard to keep them from getting a judgment most of the time if you know what you’re doing, and of course that’s why we’re here.

Don’t Ignore the Possibility of Losing Even if you Defend

Of course, if you’re being sued there’s always a chance you could lose. ALWAYS A CHANCE.

That means that you need to keep personal information about jobs and assets out of the hands of the debt collectors whenever possible.

If you have ever written a check to the company who is the alleged original creditor, you must assume that the debt collector has your banking information. You might want to change banks.

Remember that garnishments are served on people (including corporations and banks), not accounts, so it doesn’t do any good to cancel your account and get a new one in the same bank. But changing banks will go a long way to keep you from finding out, one day, that your bank account has been emptied and your checks are now bouncing.

For a lot of people it’s harder to change jobs. I’m just saying that if you do, it will be harder for the debt collector to garnish your wages. If they have any reason to know where your present job is, you should expect them to come for it.

Your Legal Leg Up

Your Legal Leg Up is dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. Lawsuits have a number of points where specific action is called or, and we have products to help you deal with most of these situations. We also have memberships that give you access to more materials and better training, and also provide a regular opportunity to ask questions and get answers in real-time. You can use this time to find out what the debt collectors are trying to do and what you might do in response, and you can get guidance on the issues that matter and how to think about and address them.

In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many others are available to everyone. Every page has a site search button in both the header and footer. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

Products Related to this Article

If history is any indication, many of the people reading this article are here because there’s a default judgment against them, and the debt collectors are now after their money. If that’s you, there’s still hope (even aside from the fact that your Social Security payments should be safe). You should consider attempting to undo the judgment – that’s called “vacating” it – and you do that by filing a “Motion to Vacate.” Click here to begin your research on that question. And we have a product that will help you file a motion to vacate.

Most of the rest of the people reading this will be because they are in the “collection cycle” somewhere and are either being threatened with suit or are being sued. If that’s you, you will want to take a look at what the risks of ignoring the suit are versus the costs and advantages of fighting it. I normally suggest fighting it because the risks if you lose are minimal (you won’t make things worse), while the benefits of winning are more substantial than you think, even if you aren’t worried about garnishment.

In any event, if you’re considering defending, I’d suggest you give some thought to our memberships.

Memberships

Members get the Litigation Manual and the Three Weaknesses Report for free with membership. They also get discounts on all products as well as unlimited opportunities to join our regularly scheduled teleconferences, where you can get unlimited real-time assistance, answers to questions, help with strategies, and encouragement. Find out about memberships by clicking the “About Memberships” link in the menu at the top of the page.

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What you’ll receive if you sign up is a series of several videos and articles spread out over several days, and then you will occasionally hear from us as we add information to the site. We don’t always announce that information, though.

What you will not receive is any marketing from other people – or much from us, either. Our goal is to make the site more useful to members and visitors, not to swamp anyone with sales materials. The information we send will have links to information or products that we think may be helpful.

Garnishment of Assets

June 20, 2018

Overcoming Default Judgments

June 20, 2018

As anybody familiar with my work knows, most debt cases end in either default or “give-up settlements,” where the person sued agrees to everything (or almost everything) the debt collector wants. It is one of the strangest things in all of law: most debt cases that are filed couldn’t be won if they were opposed; but very few people fight. So 90 percent of the unwinnable cases filed in debt are in fact won with the greatest of ease.

Strange.

So what is a default? It is first a court order, and often a judgment immediately or after a short delay, giving the plaintiff – the person who brought the suit – whatever they wanted. It happens when the defendant does not show up or defend himself or herself in court. Note that “default” is not the correct way to describe what happens if you DO show up and lose. The result of not showing up is usually a complete, automatic victory for the plaintiff, and that’s what we’re talking about.

The courts do not “favor” such an outcome. That’s because a case that is won because it wasn’t opposed is not a victory “on the merits” – there’s no real indication it’s fair, and as everybody knows in the debt context, it often is NOT fair. But what can the courts do?

If you have had a default against you, you may have a chance to get that changed. If you take steps, and if they think you weren’t playing games in the first place, they will often reverse the judgment. Then you go back to defending the lawsuit. If you get that far, you will probably win the suit – 90% of winning the case will be in getting the judgment vacated (removed). That will stop collection and start the case over – but if you’re willing to fight, and manage to get the default judgment vacated, you’ll find the rest of it pretty easy.

We have products that can help you do all that.

Exemptions from Collections

June 17, 2018

State Law Exemptions from Collection

Try This If You Are Garnished

Collection is an extremely unpleasant thing, and you will want to avoid it if possible. That means not allowing anybody to get a judgment against you.

We don’t include this information here to help you avoid collection, however. This information should help you understand the legal status of your assets for purposes of your negotiation planning. Remember: you should think long and hard about giving a debt collector any protected assets (which all of these exemptions are), but that does not mean you should never do so. These exemptions are the exemptions provided under Missouri law (paraphrased – look up the law for exact statutory language), but different states have very different rules on some of these exemptions (most notably on homesteads). For an exact understanding of all the exemptions under your state’s laws, we suggest you google the term “exemptions from levy” plus your state’s name.

There are specific procedures you would follow in order to claim these exemptions if a levy (garnishment) occurred, but again, we include this information simply as a guide to understanding the legal character of your assets.

513.430 RSMo. 2010 et seq. provides the following exemptions:

1. Household furnishings and goods, clothes, appliances, books… held primarily for personal, family or household use of the debtor or a dependent, not to exceed $3,000 total.

2. A wedding ring worth not more than $1,500, plus other personal jewelry worth no more than $500 total.

3. Any property, of any kind, not to exceed $600 in value in total.

4. Implements, professional books or tools of the trade of the debtor or a dependent worth not more than $3,000.

5. Any motor vehicle worth not more than $3,000.

6. Any mobile home used as the principle residence but not on or attached to property owned by the debtor, worth no more than $5,000.

7. Any unmatured life insurance contracts.

8. Amount of any unaccrued dividend or interest under, or loan value of, any one or more unmatured life insurance contracts.

9. Professionally prescribed health aids for debtor or dependents.

10. Right to receive social benefit, unemployment compensation, or a local public assistance benefit, veteran’s benefits, disability, illness or unemployment benefits, or a stock bonus plan (etc.).

11. Right to receive money or property traceable to a payment on account of the wrongful death of an individual on whom the debtor was dependent (with some limitations).

12. A homestead consisting of a house and appurtenances and land worth not more than $15,000.

Can they Garnish Your Social Security?

May 25, 2018

Overcoming Default Judgments in Debt Cases

May 15, 2018

This is a companion to the video, “Procedure for Moving to Vacate Default Judgments.” This video explains why you should try to vacate (remove) a default judgment against you and generally how to go about doing it. The second video goes into a little more detail on that and tells you specifically what documents you will need to file and what they should contain. If you have defaulted on a debt suit and want to try to reopen it (to prevent collection), check out our product: Motion to Vacate Pack. For a more comprehensive understanding of the debt law and defense, you need our Debt Defense System.

We categorize this video under “collection” because often the way people discover there’s been a default judgment is that there is some action to garnish wages or collect on the judgment. If that’s your situation, it isn’t too late. To prevent the collection/garnishment, you will need to get the judgment against you vacated (eliminated). And the very first step in doing that is finding out what happened. To do that, you will go to the court, look up the judgment, get the file on it, and look in the file to see what happened.

It gets a little more complicated than that after you find out what happened, but there are actions you can take, and our job is to help you figure out which and to do them.

Garnishment and other collection methods

Garnishment of Assets – Can they Take your Wages or Bank Account?

May 3, 2018

Can your wages be garnished by a debt collector? What about bank accounts? Here are some things you need to know about garnishment.

If you have assets, and this includes either a job or money in the bank, you must be concerned about the possibility of being garnished if a debt collector (or anybody else) has a judgment against you.

Bank Accounts

Bank accounts can be garnished and, when they are, it is almost always a surprise to the debtor. What typically happens is collectors obtain money judgments (usually by default) and then use the judgment to freeze the funds in your bank account. State law and banking rules govern how the bank must handle the garnishment process. Collectors always notify the bank first and then notify the debtor. This way your funds are frozen before you can take any action such as withdrawing all your funds.

Their notifying the bank first is perfectly legal. You typically receive the notice (including your rights) a day or two after your funds have been frozen. In most states, the garnishment can not only freeze funds already in your account at the time of service on the financial institution, but can also reach funds that get put in the bank afterward, for a time.

During the time the garnishment is in effect, the financial institution will not honor checks or other orders for the payment of money drawn against your account. This means any outstanding checks will more than likely bounce or be returned for NSF. The exception to this rule is if your account has more on deposit than the amount of the garnishment. In this case, the bank can honor checks up to the amount that will reduce your funds below the amount of the garnishment. When the amount being garnished is paid, the freeze on your account must be terminated.

Wages

Wages can also be garnished, and, again, your first notice that you are being garnished is likely to be when you receive a check that is less than you thought it would be. Federal law limits the maximum amount that can be garnished by one or more garnishment orders to 25 percent of your disposable earnings for that week, or the amount by which disposable earnings for that week exceed thirty times the Federal minimum hourly wage, whichever is less. In simple terms, “disposable income” is whatever money you have left after paying all required taxes and national insurances!

Disposable income is after-tax income that is officially calculated as the difference between personal income and personal tax and nontax payments. In general terms, personal tax and nontax payments are about 15% of personal income, which makes disposable personal income about 85% of personal income.

IMPORTANT: In order for wages to be garnished, disposable earnings per week must exceed thirty times the federal minimum hourly wage or $154.50. Put another way, if you make $154.50 or less per week your wages cannot be garnished – for now and as long as you don’t make any more than that. Also – Social Security and some other types of disability or retirement income are protected from collection.

There are also important state rules regarding garnishment, and if you are garnished, or if you bank account is seized (especially), your first move should be to look at the state laws on garnishment and see if an exemption applies to you. They often will.

But You Should Not Let them Get a Judgment

All of the above being said, you will almost always be much better off it you can avoid letting them get a judgment against you. Things could get better for you in any number of ways. Just because things seem bleak now doesn’t mean that the sun won’t eventually shine. And it isn’t all that hard to keep them from getting a judgment if you know what you’re doing.

If you want help fighting the debt collectors, you should consider our new FastTrack Membership. Go here for more information on debt collection and defense, and how we can help you. We can also help you overcome a default judgment.

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