When a borrower is so late on a debt that the creditor must secure a court-ordered judgment against him, the judgment is often issued in the form of a garnishment. While many types of assets and income can be garnished, certain types are exempt, as provided by federal law. Tennessee law helps these borrowers even more by providing additional protections.
Unemployment and Severance Benefits
Unemployment insurance is protected from garnishment not only by Tennessee law but by federal law as well. There is a caveat: if the creditor is seeking the payment of back child support, alimony or taxes, unemployment payments may be garnished. Recent federal legislation requires banks to mark protected funds in the accounts of borrowers to protect these funds from garnishment; however, establishing a separate account that only holds unemployment funds should provide for their complete protection. While unemployment payments are exempt from garnishment, severance payments are considered salary and may be garnished.
Community Property
While some states permit creditors to garnish the accounts of a borrower's spouse -- these states are called community property states -- Tennessee is not one of them. However, funds that are in a joint bank account may be garnished. If you suspect that your unemployment funds are about to be garnished, contact an attorney immediately to challenge it; it may be difficult to get those payments back after they've been garnished.
Additional Tennessee Exemptions
Unemployment benefits aren't the only kind of nonwage payment that's exempt from creditor garnishment. Social Security payments are exempt in Tennessee. The state also provides protections for retirement benefits for public and private employees, as well as public assistance programs, such as workers' compensation and veterans' benefits. Some damages and awards payments from personal injury lawsuits, wrongful death and crime victim's compensation funds are protected, in addition to insurance payments and some alimony and child support income.
Tennessee's Maximum Threshold
Tennessee law also provides some protections for nonexempt income, such as severance pay. The state allows the lesser of 25 percent of disposable income or the difference between the borrower's weekly earnings less 30 times the minimum wage. While some adjustments may be made for dependent children and tax or child support debt, the purpose behind the limit is to leave enough for the borrower to live on. However, keep in mind that what the state believes is "enough" may be radically different than what the borrower believes is "enough."
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