If you fail to make payments on a debt and make no effort to resolve your past-due balance, your creditor may opt for aggressive collection strategies. In Colorado, these strategies may include garnishment of your wages in some cases. Wage garnishment typically occurs through a traditional employer, which withholds the garnished funds before issuing your paycheck. Because a creditor cannot execute an order upon an employer to collect from self-employed debtors, they must typically use other strategies to collect from the self-employed.
Judgment
In most cases, except when a debt is for unpaid child support, federal taxes or state taxes, a creditor must obtain a valid judgment against you from a Colorado court before taking any of your earnings or assets. A creditor can obtain a judgment by filing a lawsuit against you in a civil court, typically in your home county. However, you may contest the lawsuit and avoid a judgment if you can show the court that you have paid the debt or that the creditor did not file the lawsuit according to Colorado procedural rules.
Bank Garnishment
Instead of executing a wage garnishment, a creditor may opt to garnish your bank account balances to satisfy a judgment debt. After receiving a judgment from a Colorado civil court, the creditor may apply to the court for a writ of garnishment. It may then contact your bank and demand that the bank freeze your account and turn over its funds to the court to pay against your judgment debt. Unlike some states, Colorado does not provide a monetary threshold below which a creditor cannot take funds in an account. However, the creditor cannot garnish savings account deposits while you are on active military duty outside of the United States.
Liquidation of Assets
If you own a home, a car or valuable personal property, a judgment creditor may place a lien on the property, preventing you from transferring or selling it until you have satisfied your judgment debt. If you have enough equity in the property, the creditor may seize and liquidate the property to satisfy your debt. However, Colorado law provides an exemption of $45,000 equity in your residence -- if you have less than this amount in equity, the creditor cannot force the sale of your home.
Interrogatories
Judgment creditors typically have little trouble finding out where a traditionally employed debtor works or banks so they can execute a wage garnishment order. However, it can be more difficult for a judgment creditor to learn of your earnings if you are self-employed, particularly if you do not deposit your earnings into an account held by a Colorado bank. A judgment creditor may require you to respond to interrogatories, either in writing or through a deposition, to find earnings and assets it can take to satisfy your debt. If you do not respond, the court that issued the judgment can order you to respond. Colorado law does not prohibit the taking of self-employment earnings disclosed in an interrogatory, regardless of where they are held.
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