Garnishment is an involuntary collection process by which a creditor may seize certain forms of income when an individual fails to pay a debt. Most creditors cannot legally garnish debtors without first having a court order allowing them to use garnishment as a debt recovery tool.
Facts
Some forms of income, such as Social Security benefits and retirement pensions, are immune from garnishment by most creditors. Because the majority of the income most retired persons receive qualifies as exempt from garnishment, creditors are often unable to use garnishment effectively against retired individuals.
Significance
Funds that are exempt from most creditors aren't exempt from the federal government. Thus, a retired individual who owes a government debt, such as back taxes, may lose a portion of his retirement pay or federal benefits. In addition, the government may withhold tax refunds as payment for any federal debt.
Considerations
Bank account levies occur when creditors garnish the funds an individual holds within her bank account. In order to prevent creditors from seizing exempt funds, a debtor must notify her bank of the types of exempt funds contained in her account and the amount that is exempt.
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