Trying to collect an unpaid judgment from a debtor uninterested in being cooperative can be challenging. Judgment creditors, their attorneys, and collection agencies all need to look at the tools available to them under the law. Garnishment is one such tool most states allow. But it is not always the best tool.
In the absence of any other method, judgment creditors may turn to garnishment. Garnishing a debtor’s wages or bank accounts rarely yields a huge payout in a short amount of time. In fact, yields can be slow and small. But there are times when anything is better than nothing at all.
Two Types of Garnishment
Utah judgment collection specialists Judgment Collectors says there are two basic types of garnishment. The first is wage garnishment. This is a scenario in which a judgment creditor uses a garnishment order to compel the debtor’s employer to withhold a certain amount from every paycheck. The withheld amount is forwarded to the creditor to pay off the debt.
The other type of garnishment is bank account garnishment. This is a scenario in which a garnishment order compels a bank or credit union to freeze a debtor’s accounts and forward the money in those accounts to the creditor.
Judgment Collectors points out that not all states offer garnishment as a judgement collection tool. Some states allow both, others allow neither, and still others allow wage garnishment but not bank account garnishment.
Garnishment Has Its Limits
Garnishment isn’t always the best collection tool for the simple fact that it has limits. Take wage garnishment. A judgment creditor cannot take a debtor’s entire paycheck. In fact, most states with wage garnishment laws limit the amount to a certain percentage of disposable income.
If you are not familiar with the principle, disposable income is considered the money left over after a person pays their bills. Let us say a debtor earns $600 per week. He needs $500 to meet his normal expenses. That means he has $100 in disposable weekly income. That amount could be subject to garnishment.
Let us also assume the state in which the debtor resides only allows garnishment at a rate of 50%. That means the creditor could only take $50 per week from the debtor’s paycheck. That amount is better than nothing at all, but it is so small that it could take years to pay off a sizable judgment.
People Lose Their Jobs
Garnishment can also be an unattractive judgment collection tool due to the fact that people lose their jobs. You cannot garnish unemployment benefits, so collection efforts stall when garnishees are laid off or fired. But then there is something else to consider: a debtor quitting his job in order to avoid paying.
In states that offer fairly generous unemployment benefits, it’s possible for a debtor to realize more take-home pay through unemployment then he would get continuing to work while being subject to wage garnishment. If the debtor must choose the lesser of two evils, unemployment might suddenly sound more attractive.
There Are Other Options
The good news for judgment creditors is that there are other options. Not only that, but multiple options can also be employed simultaneously. In addition to garnishment, judgment creditors can file property liens. Certain assets might also be subject to seizure and sale.
Garnishment is just one tool for collecting unpaid judgments. It is simple enough and moderately useful. It’s just not always the best choice. It is up to creditors and their attorneys to determine whether garnishing wages or bank accounts is worth the time and effort. It might not be in some situations.