If you miss payments on a consumer debt and make no attempt to work with your creditor to catch up your payments, the creditor may hire an attorney to file a lawsuit against you for the entire amount of the debt. In most cases, the court will award a judgment to the creditor, which allows the creditor to pursue collection activities such as wage garnishments and property liens in most states. If your state permits garnishment, the creditor can establish a property lien and garnish your wages at the same time.
Purpose of Garnishment
A wage garnishment allows the judgment creditor to take a portion of your wages to apply to your judgment debt without your consent. After obtaining a court judgment, the creditor can obtain a writ of garnishment from the court, which authorizes the creditor to order your employer to withhold part of your earnings. Your employer then sends the withheld amounts from each paycheck to the court, which forwards the funds to the creditor for payment against the judgment. This process typically continues until you satisfied the debt.
Purpose of Lien
A lien gives the judgment creditor legal rights of ownership of your property. After the court awards a creditor a judgment, it will place a lien against the title to your home, as well as on your vehicles and other valuable personal property you own. If you have sufficient equity in your personal property to satisfy the judgment, the creditor may force the sale of the property. If the creditor chooses not to liquidate the property, you typically cannot sell or transfer it until you satisfied your judgment debt.
Rationale
A judgment creditor may use both wage garnishment and property liens to maximize its ability to collect on an unpaid judgment. A wage garnishment is a faster, more predictable and less costly means of collecting on a judgment debt than liquidating personal property, so most creditors prefer this strategy. However, a lien prevents you from quitting your job and selling your personal assets to provide you with income while you avoid wage garnishment.
Limitations
Although a judgment creditor may use a lien and garnishment at the same time, it is subject to limitations on each. Federal law limits wage garnishment to a maximum of 25 percent of your post-tax earnings, except for cases involving unpaid taxes, child support and alimony. Four states -- Texas, North Carolina, Pennsylvania and South Carolina -- do not permit wage garnishment for most judgment debts. State laws typically also impose limitations on liens and property liquidation; for example, Ohio allows you to exempt $1,075 in personal property and $20,200 for a primary residence.
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