Indiana is one of the many states that permits creditors to garnish debtors' wages to recover unpaid debts, such as credit card debts or defaulted loan agreements. Some states establish a withholding percentage that represents the most an employer can withhold from an employee's weekly pay for a wage garnishment by a creditor. Indiana follows federal limits, which Title III of the Consumer Credit Protection Act regulates.
Process
To begin the wage garnishment process, a creditor in Indiana must file a lawsuit against the debtor. If it proves to the judge that the debtor owes the debt, the judge grants the creditor a judgment. In this case, the creditor is called the "judgment creditor." If the creditor knows where the debtor works, it can apply for a wage garnishment with the court that gave it the judgment. Garnishment begins only after the debtor receives a 10-day notice. This gives him a chance to settle the debt before the garnishment is scheduled to start.
Withholding Amount
When an employer receives a wage garnishment, it should perform the withholding according to the instructions stated on the notice, unless it is contrary to the law. An Indiana employer is supposed to withhold no more than the lesser of 25 percent of the debtor's disposable income or the amount by which her disposable income exceeds 30 times the federal minimum hourly wage. This applies to all ordinary wage garnishments, such as those involving creditors. If the garnishment withholding information is incorrect on the paperwork, the employer should contact the issuing court to resolve the matter before starting the withholding.
Administrative Fee
An Indiana employer can collect an administrative fee to compensate for making garnishment deductions. This amount can be the greater of $12 or 3 percent of the total garnishment amount. An employer who chooses to charge a fee takes half of it from the debtor, which can be withheld directly from his disposable income, and the other half from the creditor, which is deducted from the garnishment amount otherwise due to the creditor.
Statute of Limitations
The statute of limitations for seeking a judgment against a debtor in Indiana is six years for open accounts such as credit cards, six years for written contracts concerning monetary payments, 10 years for written contracts concerning non-monetary payments and four years for written contracts pertaining to sale of goods. A creditor has up to 20 years to enforce a judgment via wage garnishment.
Considerations
A judgment in Indiana accrues interest at the rate of 8 percent per year until satisfied.
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