Can Credit Card Collectors Garnish Tax Checks?

The purpose of a garnishment is for a creditor to intercept wages or money paid to you to satisfy a court judgment. The garnishment order is delivered to the party issuing you the money, like your employer. Some creditors can garnish your tax refund from the IRS or your state, but civil creditors, like a credit card company, are not permitted to do so.

Features

A credit card company must file a lawsuit against you in court to obtain a money judgment for a debt you owe. Once the creditor receives the judgment, he can use the collection enforcement methods available to him under local laws; the methods commonly include bank account seizure and wage garnishment. However, a federal or state creditor does not need a money judgment to collect debts.

Debt Types

State income tax refunds can be taken to satisfy past due child or spousal support that was established by court order. A student loan you had through or backed by the federal government that is in default for nonpayment can result in the loss of your federal refund in its entirety; the money is intercepted by the government and applied to the outstanding loan balance.

Effects

Your federal tax refund can be taken in full by federal creditors, and your state refund can be kept by the state. A state tax agency, acting on behalf of the U.S. government, may intercept your state refund for a federal debt if directed to do so. In cases where your refund exceeds the money you owe, you receive the difference. The IRS and state tax revenue departments typically send a notice to you if your refund money was intercepted for a debt.

Considerations

A civil creditor can freeze your bank account, locking you out of access to your funds. Your tax refund may be in your bank account when a credit card company seizes the account. Although some types of income are exempt from bank account freezes, like Social Security benefits, your tax refund is not. The creditor is permitted to remove the funds from your account to satisfy the outstanding debt, and your tax money may be part of the seizure.