The writ requires a bank to put a hold on the debtor’s account so the creditor can be paid. The amount that can be taken from the account is determined by the judge who issues the writ. There are, however, restrictions. “The debtor can challenge the garnishment if, for example, some bank funds are exempt [e.g., Social Security payments or individual retirement accounts] under federal or state law,” explains Amendola.
A creditor also can seek a writ of garnishment for wages if the debtor is employed. This compels the debtor’s employer to deduct a certain amount from his or her paycheck every pay period and send the money to the creditor. Amendola explains that this type of writ covers not only wages or salary, but commissions, bonuses, and other compensation.
Federal law limits the amount that can be garnished from net wages—the amount left after deductions for taxes, Social Security, Medicare, and unemployment insurance—generally to 25 percent. Some states also have debtor protections in place, limiting garnishment amounts. North Carolina, Pennsylvania, South Carolina, and Texas don’t allow wage garnishment for commercial creditor debts at all.
In addition, “many states provide a head of household exemption,” DeFalco explains, which protects those who are the primary or sole source of support for a dependent. In Florida, for example, earnings garnishment is highly restricted and often denied for head of household debtors.
Due to the many variations from state to state, the Uniform Law Commission proposed a “Uniform Wage Garnishment Act” last year to streamline the garnishment process and limit the involvement of the courts. At this time, though, it is still up to each state legislature to enact the proposal.
Filing a judgment in a county where a debtor owns property automatically places a lien on the property. Once again, there are exceptions as all states exempt certain types of assets from judgment liens. For example, some states, like Florida and Texas, enacted homestead exemptions, which makes it impossible for a debtor’s primary residence to be seized. In other states, only ‘real’—that is, not personal—property can be seized.
Having a lien on real property means the judgment creditor will be paid when the property is sold. It could still take months or years for the creditor to be paid; banks or other financial institutions may hold a mortgage on the property, and there could be other creditors that have previously placed a lien on the property as well. In this scenario, Amendola says creditors will be paid on a “first in time, first in right” basis.
Depending on how many other creditors are owed, there may not be enough equity in the property for a judgment creditor to be paid in full. There is also the possibility the debtor will file for bankruptcy protection. A lien against real property is dischargeable in a bankruptcy, so the creditor may be out of luck altogether.