FAQ: What is Garnishment?

If you have owed money to someone for a while and haven’t made any effort toward paying it off, that creditor may threaten to “garnish you”. A garnishment is a way for creditors to collect on unpaid debts. From my experience talking with debtors, I know that many people don’t understand what a garnishment is or how a creditor goes about getting a garnishment in place. The fear of being garnished is on the minds of many people who ultimately file a bankruptcy.

Simply, a garnishment is a legal process where a creditor with a money judgment against you can collect the amount of that judgment plus interest by taking part of the wages you receive each payday from your employer. This is done legally through an order from the court. A creditor can also try to attach the money in your bank account, but that is much less common. Usually, the creditor is looking to take regular deductions from your paychecks until the debt is paid off.

However, the creditor cannot start garnishment proceedings until after they sue you in court and the judge has awarded them a judgment against you. To sue you, they have to file papers in a court in the area where you live, setting out in detail why they believe you owe them money and attaching either a copy of a billing statement or a contract to prove it. They then have to “serve” you with papers, which means that they must follow certain procedures under the law to make sure you actually get a copy of the lawsuit. If you dispute that you owe the money, you can file what’s called an “answer” with the court, and the matter will be set for hearing before the judge or hearing officer.

The important thing is that a creditor cannot start garnishment proceedings with your employer until after the creditor gets a court order awarding judgment against you. The creditor also has to know who your employer is. [Possibly that information is an application you prepared to get the credit, such as for a credit card. It is also possible that once the creditor has its judgment against you, he may require you to submit to a “judgment debtor’s exam”, where you might have to reveal the name of your employer under oath.]

The procedures that a creditor has to follow to set up a garnishment are strictly set out under Ohio law in Ohio Revised Code Chapter 2716. The law sets a limit as to how much of your earnings a judgment creditor can have deducted from your salary: in Ohio, right now it is 25% of your disposable income (the amount of your pay remaining after taxes, social security, domestic support obligations, and tax liens have been deducted from your gross earnings).

The first thing that a creditor with a judgment has to do to set up a garnishment is to send you a written demand for payment. This is usually done in a form obtained from the court, and requires you to fill in your payroll information and the name of your employer. You would also get your employer’s signature and would return that completed form with a first payment to the creditor within 15 days of receiving it.

If you do not return the completed demand form to the creditor within the 15 days set by law, then the judgment creditor can file a written affidavit (statement under oath) with the court stating that all legal procedures have been followed and the debt is still unpaid. The court then issues an order of garnishment of personal earnings, which is served on both you and your employer. It is generally a continuing order, which means that your employer must deduct the amount of the garnishment from your future earnings until the amount of the judgment is paid off. If you have a previous garnishment in place when this new one is ordered, then your employer has to let the court and creditor know, as you can only be subject to one garnishment of your disposable earnings at a time, and this new one won’t kick in until the prior one has been paid off.

Garnishment proceedings involve a fair amount of paperwork and record-keeping for your employer, which could result in jeopardizing your relationship with your workplace. Therefore, it is ideal if you can avoid having a collection account go to judgment and then garnishment. It is likely that if you have one such debt that you cannot pay off yourself, that you have others as well. The one way to stop a garnishment in its tracks is to file a bankruptcy. The employer must stop deducting the garnishment amount as soon as it is notified that you have filed a bankruptcy. Your attorney should make the notification by sending both your employer and the creditor (usually through its attorney) the official notice of bankruptcy filing issued by the Bankruptcy Court as soon as possible after the filing. At that point, any money that’s in transit at that time should also be returned to your employer and then to you.

The debt itself will then be resolved through the bankruptcy proceedings. With the threat of garnishment as well as other means of debt recovery by creditors, it’s best to seek a consultation with a good bankruptcy attorney as early as possible when you can foresee that your debt situation has gotten out of hand.