When a creditor is seeking money from a debtor, he has a number of different methods by which he can attempt to collect the money owed him. One of the most serious is to file a lawsuit against the debtor. A judge may then award the creditor a legal settlement against the debtor. To secure this award, the creditor may file a motion to garnish the debtor's wages.
Garnishment
When a creditor garnishes a debtor's wages, he asks the debtor's employer to divest a portion of the debtor's paycheck to the creditor. This money can be diverted until the creditor has been paid off. All garnishments must be ordered by the judge who has awarded the creditor the money in civil court. However, in nearly all cases, private creditors cannot divert income provided by state or federal governments for garnishment, including employment benefits.
Unemployment Benefits
Unemployment benefits is compensation provided by state governments to people who have recently lost jobs. These benefits are intended to help the worker meet basic expenses while he finds work. If a person is receiving significant amounts of other income, he is generally ineligible to receive benefits. Federal law prohibits creditors from garnishing these benefits, as they are not regular income -- payments are temporary -- and because the person may be using this money to survive. However, if the person is rehired, he may be eligible for garnishment of his new job's wages.
Severance Pay
If a person is receiving some form of unemployment compensation from the company that fired him -- for example, he is receiving severance pay in the form of periodic payments -- then this income may be eligible for garnishment. This is because, although the person may technically be out of job, he is still receiving income from an employer. Only compensation issued by the government is ineligible for garnishment.
Debts To The Government
While private creditors cannot garnish income paid by the government, many government agencies -- particularly federal government agencies -- can under certain circumstances. If a person owes money to the government, then, depending on the agency to which he owes money, the agency may be able to garnish his unemployment benefits. This is always the case if the person is behind in child support payments or owes back taxes.
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