- Garnishment is a legal remedy that a creditor can apply for that grants the creditor a court order to seize part of a debtor's paycheck, bank account or other assets to satisfy a debt. Under the court order, the employer or bank is required to turn over the money to the creditor directly rather than paying it to the debtor. The IRS is one of the only exceptions to the general rule. It can seize assets and garnish wages without a court order.
- Every state has different rules on how creditors must proceed with collection efforts. Some state rules set a minimum amount of time before creditors can apply for a seizure order. The debt must be legal and contractually bound. Most credit contracts contain a clause clarifying the rights of the creditor to seize funds, but it is not a required disclosure. Creditors also do not have to warn the debtor about impending court action. Therefore, it is always best to keep in contact with creditors and try to work out a mutually agreeable repayment plan, rather than involve the courts.
- A debtor will receive a copy of the court order or other notification when the creditor has been successful in obtaining the right to garnish. This notification may or may not come before the creditor exercises their rights under the order. The first indication a debtor may have that a garnishment is in place is a zero balance in his bank account or a much smaller paycheck. Most employers, however, will let the employee know as soon as they receive a garnishment order.
What Can't Be Garnished?
- Certain types of payments cannot be seized through garnishment in most cases. Social Security, veteran's and other federal benefits cannot be garnished for consumer debt. In cases of garnishments for delinquent child support payments, federal benefits are eligible. If a debtor's bank account contains only these types of payments, a bank may try to assess whether the amounts are eligible for seizure. If ineligible amounts are taken, the debtor must apply to the courts to have them returned.