When a creditor wins a judgment against you with regard to an outstanding debt, he gains power to perform a number of debt-recovery actions. These powers allow him to lawfully go after your finances directly, effectively removing you from the debt payment equation. Some funds are protected from such actions by federal law though the greatest determiner of how much of your money is protected is the nature of the debt you owe.
You Have to Pay the Debt
Yes, when a court orders you to repay a debt you really have no choice. The court does not make this decision lightly and only arrives at it through careful examination of your finances to determine if you can reasonably be expected to repay a debt with your current salary and living situation. A court will generally not force the repayment of a debt if payments will send you below the poverty line, render you unable to make rental or mortgage payments or significantly impact your ability to provide care for your family.
In many states across the country a court may order the garnishment of your wages to force you repay a debt. This means that payments to your creditors are taken out of your paycheck after taxes -- you never see the money. Even states where wage garnishment is illegal still allow wage garnishment if your debt is connected to back taxes, federally funded student loans, court fines and child support payments.
Bank Account Seizure
Once a creditor wins a judgment against you he may place a hold on your checking or other bank accounts to pull money out of them for the purpose of paying your debt. This helps creditors collect payments from debtors who may be self-employed and don't necessarily bring home a paycheck to garnish. A bank account hold can be used to seize any funds available in the account including income from work, tax refunds and gifts.
Payments from Social Security, federal pension funds or Social Security disability funds are exempt from bank account seizure and garnishment. This means a creditor cannot touch these funds as part of a garnishment or account seizure decision. Some debts, such as back taxes, child support payments, outstanding court fines and alimony may be paid through the garnishment of Social Security benefits and retirement funds.
Jonathan Lister has been a writer and content marketer since 2003. His latest book publication, "Bullet, a Demos City Novel" is forthcoming from J Taylor Publishing in June 2014. He holds a Bachelor of Arts in English from Shippensburg University and a Master of Fine Arts in writing and poetics from Naropa University.