A garnishment can be initiated against any form of income you might receive, including a tax refund, subject to the laws of the state in which you reside. The mere fact that you owe money on a credit card debt does not necessarily mean that your tax check will be garnished. In fact, garnishment is a legal process that requires a court order.
Validity
After a debt has been determined valid by a court, a judgment is entered against the debtor. The court order may require that money owed to you be garnished and third parties will be ordered to divert your money to the creditor as partial payment of your debt. This judgment and any garnishment obtained to collect the award are subject to a statute of limitations that eventually will expire.
Statute of Limitations
A statute of limitations is a legal timeframe set by your state that dictates a limit on the period of time that a garnishment can remain in force. After that, the debt can no longer be collected. Visit the CardReport.com website for a state-by-state list of statutes of limitations (see Resources).
Considerations
In some states, the law stipulates that the debts of one spouse cannot be collected from the assets of the other. In those states, a tax return filed jointly would only allow for garnishment against the individual debtor, meaning only half the tax refund could be garnished. Check with your state tax department or attorney general's office for more information.
Solution
In some instances, a garnishment can be settled for less than the full amount owed. Communicating with the company or agency attempting to collect the debt is required.
Effects
The Internal Revenue Service cautions that any portion of a debt forgiven as the result of settlement negotiations is considered a form of income and therefore taxable. Failure to pay a debt normally allows interest and penalties to accrue, which may increases the cost of any settlement, so the sooner you act the better when it comes to debt resolution.
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