What is Garnishment? A Key Financial and Legal Term Explained
Garnishment is a legal process where a creditor can collect unpaid debts by seizing money directly from a debtor’s wages, bank account, or other financial assets. This process is typically initiated after a court judgment against the debtor, and it ensures the creditor receives payment for outstanding debts, such as loans, child support, or unpaid taxes.
How Does Garnishment Work?
Once a creditor obtains a court order for garnishment, they can request that the debtor’s employer or financial institution withhold a portion of their income or funds and send it directly to the creditor. The rules governing garnishment vary by state and the type of debt involved.
Types of Garnishment:
- Wage Garnishment: A portion of an employee’s paycheck is deducted to pay off the debt. Federal law limits the amount that can be garnished to prevent undue hardship.
- Bank Account Garnishment: Funds are seized directly from the debtor’s bank account.
- Tax Refund Garnishment: Overdue debts like unpaid taxes or defaulted student loans can lead to garnishment of federal or state tax refunds.
Key Limits on Garnishment:
- Federal Law Protections: For wage garnishment, federal law typically limits the garnished amount to 25% of disposable income or the amount by which weekly earnings exceed 30 times the federal minimum wage, whichever is less.
- Exemptions: Certain income sources, such as Social Security, disability benefits, and veterans’ benefits, may be exempt from garnishment in most cases.
How Garnishment Impacts Personal Injury Clients
For personal injury claimants, garnishment can become an issue if they owe debts while awaiting a settlement. Creditors might attempt to garnish settlement funds, although certain types of personal injury compensation (like payments for medical expenses or pain and suffering) may be exempt from garnishment under state laws. Working with an attorney can help ensure that settlement funds are protected.
How to Stop or Avoid Garnishment:
- Pay Off the Debt: Resolving the debt before garnishment starts can avoid the process altogether.
- Negotiate with Creditors: Creditors may be willing to set up a payment plan instead of pursuing garnishment.
- File an Exemption: Debtors may file an exemption claim if the garnished funds are protected by law.
- Seek Legal Assistance: An attorney can help you navigate garnishment laws and protect your rights.
Need Help?
If you're facing garnishment or need legal advice, a personal injury lawyer can help you evaluate your options and find the best path to move forward
