When a creditor files a lawsuit against you, it does so because it has given up on procuring a voluntary payment from you and instead hopes to take payment by force. Creditors that win lawsuits against debtors often have the right to request a garnishment order from the court. Through garnishment, a creditor can seize funds from both your wages and bank accounts to satisfy your unpaid debt. Under certain circumstances, debtors are exempt from garnishment.
Types of Income
While creditors are free to contact your employer and garnish your wages following a lawsuit, creditors are not free to garnish all forms of income you receive. Any federal benefits you receive, such as Social Security benefits, a military pension or student loans, are exempt from garnishment by private creditors. State benefits you receive, such as child support and unemployment payments, are also typically exempt from garnishment. If your creditor is the U.S. government or you owe unpaid child support, any federal benefits you receive are subject to seizure.
Bank Account Garnishment
The same rules apply to bank account garnishment that apply to wage garnishment. Private creditors cannot seize exempt federal and state benefits from your bank account any more than they can garnish these benefits before you receive them. Additional bank account garnishment exemptions may apply depending on your state’s specific consumer protection laws. New York, for example, does not permit private creditors to freeze and garnish an individual’s bank account if the account balance is less than $1,740. If the account contains federal benefits or other exempt funds, the exemption margin increases to $2,500.
The U.S. Department of Labor notes that, while wage garnishment and its limitations are federally enforced, each state is free to further limit a creditor’s garnishment rights as it sees fit. Because of this, four states – Texas, North Carolina, South Carolina and Pennsylvania – have outlawed wage garnishment and one state, Delaware, has outlawed bank account garnishment. For those in states where the practice is illegal, 100 percent of their wages or bank account balances are exempt from garnishment.
In general, a creditor can seize no more than 25 percent of a consumer’s disposable earnings – the amount the individual earns after taxes and other required deductions – each work week. The remaining amount the debtor earns is exempt from garnishment. This restriction applies regardless of how many garnishment orders an employer receives for a given individual.
- Federal Trade Commission; Creditors Seeking Federal Benefits in Your Bank Account?; May 2009
- Neighborhood Economic Development Advocacy Project; What Is Exempt From Debt Collection?; 2007
- Bills.com; Advice on Judgment Garnishment; August 2011
- Delaware State Code: Title 10 (Section 3502)
- U.S. Department of Labor; Wages and Hours Worked: Wage Garnishment; September 2009
- Department of Labor. "Garnishment." Accessed Feb. 13, 2020.
- Michigan Legal Help. "An Overview of Garnishment." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "Consumer Credit Protection Act of 1968 -15 U.S. Code § 1673.Restriction on Garnishment." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "Consumer Credit Protection Act of 1968 - 15 U.S. Code § 1672.Definitions." Accessed Feb. 13, 2020.
- Department of Labor. "Fact Sheet 30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III," Page 2. Accessed Feb. 13, 2020.
- United States Department of Labor. "Minimum Wage." Accessed Feb. 13, 2020.
- Department of Labor. "Fact Sheet 30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III," Page 3. Accessed Feb. 13, 2020.
- California Courts. "If You Do Not Pay Your Judgment." Accessed Feb. 13, 2020.
- Office of the U.S. Courts. "Discharge in Bankruptcy – Bankruptcy Basics." Accessed Feb. 13, 2020.
- Cornell Law School Legal Information Institute. "United States Bankruptcy Code - 11 U.S. Code § 523.Exceptions to Discharge." Accessed Feb. 13, 2020.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.