Tag Archives: garnishment

Garnishment of Assets by Debt Collectors

debt collectors garnish your wages? 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 the debt collector finding and garnishing your money. The risk exists if a debt collector (or anybody else) has a judgment against you.

Governments can levy even without a judgment. Our discussion here focuses on private debt collectors, however.

Bank Accounts

Debt collectors can seize and garnish bank accounts and, when they do, it is almost always comes as 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.

No Notice of Bank Garnishment

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 few days after your funds have been frozen. In most states, the garnishment can only freeze funds already in your account at the time of service on the financial institution. 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 account.

This means any outstanding checks will more than likely bounce or be returned for NSF (non-sufficient funds). In other words, your checks will bounce. 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

Debt collectors can also garnish your wages. Again, your first notice that they are garnishing you is likely to be when you receive a check that is less than you thought it would be. Federal law limits the maximum amount they can take 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  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. That 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.  (That’s $154.50 at the time of this writing.)

Put another way, if you make $154.50 or less per week your wages are immune from garnishment – for now and as long as you don’t make any more than that. Also – most debt collectors can never garnish Social Security and some other types of disability or retirement income.

But You Should Not Let them Get a Judgment if Possible

Even if you have nothing for the debt collectors to garnish, you will almost always be much better off it you don’t let them get a judgment against you. Things could get better for you in any number of ways. So they might eventually be able to garnish you when that happens if you let them have a judgment. Remember that just because things may seem bleak now doesn’t mean that the sun won’t eventually shine. When it does, you don’t want debt collectors to take your good luck away from you.

And it isn’t all that hard to keep them from getting a judgment if you know what you’re doing.

 

Judgment Proof – Letting Debt Collector Know Helpful Facts

What if there is something you actually want the debt collector to know because you think it will cause it to leave you alone?  How do you tell them so they’ll believe you when you say you’re judgment proof?

And how do you keep the judge from hearing it and deciding not to take your case seriously? This article discusses the fine art of negotiating when you think you have “nothing to lose.”

How do you Tell the Debt Collector You’re Judgment Proof?

You’ve heard the saying, “you can’t squeeze blood from a turnip.” If you don’t have money a debt collector could reach or a job they could garnish your wages from, or any other assets they could reach, you are what is called “judgment proof.” How do you let them know so they believe you and go away?

If you’re Judgment Proof if Makes No Sense to Sue You

If you’re judgment proof, you almost certainly want the debt collector to know it because it makes all their work more or less pointless. At a minimum, if you don’t have anything for them to collect, they will have to wait – possibly a long time – to get anything back from the lawsuit, and debt collectors know well that time is money. There are generally better things for them to do than chase after people who really are judgment proof and have nothing to give them.

But it isn’t enough for you just to “tell” them you’re judgment proof.  It’s too “convenient” for you, and they won’t believe it if you tell it to them too easily. Plus – if you make it too easy, they’ll just get the judgment and sit on it. They’ve already spent something to buy the debt and bring suit. They have to know it will cost them more to chase you – and that it will keep costing even though they’ll never collect anything back from it.

In this article we discuss one of the fine points of negotiation: how to let someone find out something you want them to know – in a way that will make them respond the way you want them to respond.

Here’s a little warning: Unlike a lot of what we say, this will be more the “art” of negotiation than the “science” (so to speak) of law. You might have a different feeling about it, in which case you should think about it for yourself. Put some thought into it and come up with what you consider your best strategy – you’re the one who’s going to live with whatever happens, right?

The Situation: You’re Judgment Proof

You don’t have any money and don’t think you’re going to get any for a while. You want the debt collector to know that you’re judgment proof because you want them to go away.

But there is a “hidden” problem.

Being Judgment Proof Can Mean to the Judge that You Shouldn’t Defend Yourself

The law is much more practical than a lot of people give it credit for being. If you say you have “nothing to lose,” and the judge believes it, you may find yourself losing very quickly and without real fairness or equality. After all, the judge thinks, you have nothing to lose, so why bother? Really. That’s eminently practical, isn’t it? It is the way many of them think.

Most judges won’t say that, although some will. But who wants to waste his or her time on technical fairness when there’s nothing really at stake? The law is not designed or supposed to do that.

You Won’t Be Down Forever

But the fact is, you DO have something to lose. A lot. The worm turns – you may be down now, but however far you’re down now, it only takes a few good breaks, a couple things turning around, for you to be much better. Good luck often happens to people who keep trying their hardest and looking for it, and if it happens for you, let the good luck be for you and not the debt collector. You need to keep fighting even if it looks like you have nothing to lose. You MIGHT, and that’s enough.

Judgments last a long, long time, and do you want the break that could turn things around for you to enrich the debt collectors?

Losing May Hurt you in Ways you Haven’t Considered

The other thing is that the cost of losing may be greater than you suppose. It will hurt your credit report and raise all your costs of living in invisible ways, and… there are other costs, psychologically and socially.

Play to Win

Play to win. If you’re here, you’re already doing that. Don’t blow it now by casually telling anybody you have nothing to lose.  But you still want them to know you’re judgment proof. So how do you let them know?

You make them bleed for it.

Make them Pay for Any Information they Get – Even if it’s What you Want them to Know

Letting them know that they won’t gain anything from their efforts is really just half of your goal. The other half is that they must know that they will have to use a LOT of effort, and that it will cost them a lot of money (money they’ll probably never get back). Make sure they know that you will never give them anything without a fight – a fight that’s going to cost more than they could ever hope to win.

Can’t you just tell them that?

It’s better to show them how much effort will be required first. And that’s because talk is cheap. Lawyers should know, right? And they do. Telling them it will take effort is far, far different than requiring them to spend that effort. Of course, it takes far more effort on your part, too. It means you fight everything tooth and nail – don’t give them any information they aren’t entitled to, even when it’s what you want them to know. And if you watch them, you’ll see they don’t plan to give you even information you are entitled to. Fight hard.

How Much you Have, Where you Earn it, and Where you Keep it are “Irrelevant” to the Debt Collector’s Lawsuit

As we have often pointed out, contract cases involve what’s called “strict liability.” Almost. That is, there is only the question of whether you owe the money. No one cares WHY you owe the money or why you haven’t paid it off. No one even cares, legally, whether you can pay it off. The only legal issues for the court to decide on a debt case are: do you owe it to them? And, how much do you owe? That makes the amount of money you have (what you own), where you earn it (your job), how much you earn (your income), or where you keep it (your bank) all irrelevant. You should object and force the debt collectors to go to the judge (motion to compel) to force you to give it to them if they can.

Make them work to get it. Make them work hard and spend money. And then, if you have to answer, you will. It is, after all, what you wanted them to know in the first place. And if the judge denies their motion to compel and does not make you reveal the information about not having money or a job, you can just “drop it” into a conversation with the lawyer for the other side afterward (“Well, I don’t have any money anyway…”). But then you don’t give them proof – you just say it.

If you tell the other side you’re judgment proof too easily, the judge will find out. She will be tempted to find an excuse to rule against you as we said above. Fighting hard from the beginning – especially against divulging financial information – puts the lie to that more effectively than anything you could say. It proves you are taking the case seriously.

Watch out for Laziness

So now, consider your motives here. Isn’t a main reason you want to tell them you’re judgment proof just that you want them to go away without bugging you anymore? You’re tired of your troubles and the suit?

That’s the attitude you must beware of.

Yes, getting them to believe you are judgment proof might cause them to drop the case and reduce your overall effort and inconvenience, but your main weapon in debt litigation is the willingness to spend extraordinary efforts – and to make them do so.  And this is true whether the underlying debt was ever yours or not – it takes extraordinary efforts to defend any case. Don’t give up that weapon in the search for a short cut.

Make sure the things you do increase your chances of winning without hurting your underlying case.

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About Your Legal Leg Up

Your Legal Leg Up is a business dedicated to helping people fight debt collectors without having to hire expensive lawyers to do it. We offer you everything you need to defend your rights – with special help through our membership services to help make the process smoother, easier, and less worrisome. YourLegalLegUp.com has been in operation since 2007. Before that, Ken Gibert practiced law representing people being sued for debt among other types of consumer law.

If you would like to get a personalized evaluation of your situation, follow this link: https://yourlegallegup.com/pages/evaluation.

For further help, consider our Manuals and Memberships. We have materials on debt negotiations and settlement, forcing debt collectors to leave you alone, credit repair, and many other issues that arise when you are facing debt trouble.

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Social Security Recipients in Danger of Garnishment by Collectors

Social Security recipients face a risk not only from their own debt troubles but also those of  the people that take care of them. If you receive Social Security or take care of someone who does, you should know about this.

 

Secret Danger of Garnishment to Social Security Recipients and Others

As I have pointed out in my video about garnishing Social Security, Social Security benefits are exempt from most forms of garnishment. The notable exceptions to that rule is that they may be garnished by certain government entities and for child support.

Although Social Security benefits are exempt from most forms of garnishment, collectors sometimes attach and take them. When a collector garnishes a bank account,  the bank holds the funds for a time to allow you to fight the garnishment. In plain English, they “freeze” the account, and you can’t get your money.

As a practical matter, you may be unable to fight the garnishment. Thus if you have paid for bills with an account that holds Social Security benefits, it makes  sense to switch those benefits to another bank if that creditor later gets a judgment against you. Once they get a judgment, the debt collector will look for your assets. It will try to garnish any assets in a bank they have on file for you.

I realize this can be difficult or disruptive, but if you have paid an original creditor or debt collector out of an account, you must expect that account to be garnished – seized and taken away from you – if the debt collector manages to get a judgment.

If the debt collectors seized an account,  you may or may not be able to get the money back. There will certainly be a delay, and all the money in the account, up to the amount of the judgment, will be held by the bank and unavailable to you.

Debt collectors sometimes garnish the accounts of Social Security recipients because of their caretakers.

Social Security recipients are often elderly or disabled, needless to say. Many of these people need other people to do shopping for them. Or to hold their assets in one way or another to use for their benefit. This money is held in trust and should not be available to debt collectors going for the caretaker’s money.

Here is an example that might make it clearer. Assume that Tom is taking care of Mary, his 70 year old mother. She suffers from Altzheimer’s. Mary and Tom will frequently find it helpful to allow Tom to use Mary’s account to pay her bills. If Mary’s account contains only Social Security benefits, it should be beyond the reach of any creditor. And because the money is not Tom’s at all, it should never be reachable by Tom’s creditors.

However, sometimes debt collectors will discover that Tom is paying bills using Mary’s account.  If his name is on the account, or if he writes checks upon it, the debt collectors may attempt to garnish the account.

This is not as “evil” as it may first appear. From the debt collector’s point of view, how do they know what bills Tom is paying with the account? People often hide assets from debt collectors by using other people’s accounts. The law lets creditors go after the debtor’s money regardless of whose name it is in.

On the other hand, the impact on Mary of seizing her account for Tom’s debt can be devastating. Remember, the banks will freeze the account for a while to determine whether the debt collector can take it. During that time, the elderly person cannot pay her bills. She may be evicted, be unable to pay for medicine, or face other, life-threatening and disrupting events.

Get Legal Advice

If there is a judgment against you, seek the advice of a lawyer specializing in debt collection before linking anyone’s accounts to you in any way. In my opinion, the risk extends beyond just having your name on the account. If you sign checks for someone else and have a judgment against you, you may be putting this person at risk. Get legal advice and protect them and you.