If you lend money under a signed contract in Kentucky, and the borrower fails to make payments, you may initiate collection efforts. In some cases, sending letters or emails and placing telephone calls may compel the borrower to bring payments current. However, if the borrower does not respond, you may opt for a more aggressive strategy, including garnishment. Kentucky law does not prohibit garnishing a self-employed borrower, but collecting from this type of borrower may be more difficult than executing a garnishment against a traditionally employed worker.
Obtaining a Judgment
Under federal law, you cannot garnish the wages of a borrower without a judgment. You must file a lawsuit against the borrower, typically with the circuit court in the county where the borrower resides, for the balance of the debt. The court will issue a summons containing a court date when both you and the borrower must appear to present your respective sides of the case. If the borrower does not appear, the court will award you a default judgment for the loan balance and court costs. The court will also issue a judgment if the borrower appears but cannot raise a successful defense. Upon award of a judgment, the court may set a due date by which the debtor must pay you.
Notice of Garnishment
You must wait 10 days after obtaining a judgment, or after the payment due date established by the court, to pursue earnings garnishment in Kentucky. After the 10-day period, you may apply to the court for a garnishment order. Traditionally, the court mails the order to the debtor's employer; however, if you have obtained a judgment against a self-employed debtor, the court will mail the order directly to the debtor. As a self-employed business owner, the debtor has 20 days to respond to the order.
Post-Judgment Interrogatory
Because garnishing a self-employed debtor's income does not involve compliance by a separate employer, the debtor may avoid answering the garnishment order to avoid paying the judgment. You may send the debtor a post-judgment interrogatory, which requires the debtor to disclose her assets, income and expenses. If the debtor does not respond within 30 days, you may petition the court to order the debtor to respond.
Limitations
Judgments for written contract debts have a 15-year statute of limitations in Kentucky. This means you can only continue an earnings garnishment against a self-employed debtor for 15 years after judgment unless you apply to renew the judgment. Also, Kentucky follows federal law, which limits garnishment to 25 percent of a debtor's earnings.
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