Judgments, Wage Garnishment and Bank Levy
WHAT IS A JUDGMENT?
A judgment is simply an order entered by a court which declares that a person has won a court case. In civil lawsuits in which a creditor is suing a debtor, a judgment declares that the debtor owes the creditor a fixed amount of money. Once the judgment is docketed, it becomes official. A judgment becomes a lien on all real property that the debtor owns in the county it is docketed in (though a person’s home is exempt, or protected from judgment liens), and can be docketed in other counties in Minnesota and even in other states.
WHAT CAN A CREDITOR DO ONCE IT HAS A JUDGMENT?
Once a judgment is entered, Minnesota law gives the judgment creditor the right to try to pay itself back by doing three things: garnishing the defendant’s wages, levying the defendant’s bank account, or seizing nonexempt assets. While this may sound scary – and is for those unlucky enough to have it happen to them – the good news is that bankruptcy stops garnishments (except garnishment for child support), levies, and seizures immediately on the filing of the bankruptcy case.
WHAT IS WAGE GARNISHMENT?
Once a judgment is entered, Minnesota law allows the creditor to take (“garnish”) up to 25% of the defendant’s wages. To do this, the creditor must serve a notice on a person’s employer which requires that the employer send 25% of the employee’s after-tax wages to the creditor. The creditor must give this notice at least 10 days before garnishing wages. The creditor must also send to the debtor a “garnishment exemption notice” which is a form the debtor can fill out to tell the creditor why it cannot garnish the debtor’s wages. There are a number of reasons why the creditor cannot garnish the debtor’s wages, but in order to claim these reasons, the debtor must promptly fill out and send back the garnishment exemption form. These defenses are:
- If you are receiving or have received public assistance based on need within the last 6 months, the creditor cannot garnish your wages. Public assistance based on need includes but is not limited to:
- Minnesota family investment program (MFIP)
- Supplemental Security Income (SSI)
- Medical assistance (MA)
- Payment of Medicare part B premiums or receipt of part D extra help
- Work participation cash benefit
- Minnesota supplemental assistance
- Emergency Minnesota supplemental assistance
- General Assistance (GA)
- Emergency general assistance
- Emergency assistance or county crisis funds
- Energy or fuel assistance
- Food support;
- If your wages are being garnished to pay child support or tax debts, the judgment creditor cannot garnish your wages beyond a combined total of 25% garnishment;
- If your wages are less than 40 times the federal minimum hourly wage times the number of weeks in your pay period, the creditor cannot garnish your paycheck;
- If you have been a recipient of government assistance based on need or an inmate of a correctional institution, the creditor cannot garnish your paycheck until you have ceased to receive government assistance based on need or released from a correctional institution for 6 months.
Our office regularly helps our clients fill out and send back garnishment exemption forms. Unfortunately, preventing garnishment through a garnishment exemption form is usually only temporary; bankruptcy may be the only permanent way to stop and prevent garnishment.
WHAT IS A LEVY?
Once a judgment is entered, Minnesota law allows the judgment creditor to seize the defendant’s assets (“levy”) by sending a notice or order to the entity having custody. The most common levy is a bank levy, in which the judgment creditor serves a notice on a bank or credit union requiring the bank to freeze the debtor’s assets held at that bank for 21 days. The judgment creditor does NOT have to give advance notice to the debtor – rather, the judgment creditor has to send the debtor an exemption form AFTER the money has been seized. The debtor then must fill out the exemption form to tell the creditor and bank how much money it has to give back and why. In other words, the creditor takes first, and asks questions later. If the debtor does not send back the exemption form, or none of the money frozen is exempt, then the bank is required to send the money to the creditor.
The less common type of levy is the levying of other nonfinancial assets. A judgment creditor has the right to seize nonexempt assets, such as extra vehicles, personal property, and non-homestead real property. To accomplish a levy of these types of assets, the creditor must obtain help from the sheriff to seize and sell these types of assets. A judgment debtor is required to receive notice before assets can be seized and sold by the sheriff.
WHAT DO I DO IF MY WAGES HAVE BEEN GARNISHED OR MY BANK HAS BEEN LEVIED?
The first step is to complete and return the exemption form as soon as possible. If the creditor cannot garnish your wages, you must tell them that, and tell them why they cannot garnish your wages. If the creditor has frozen your bank account, you likely have a right to get some of that money back.
The next step is to look at how to solve the problem. If the judgment is a small one, then it may be best and easiest to let the creditor garnish or take money until the debt is paid off. Another way to solve the problem may be to contact the creditor and work out a voluntary payment agreement with the creditor that is more advantageous for you, and less work for the creditor.
Most often, however, a garnishment is a symptom of a larger problem and cannot be easily remedied on one’s own. In situations like this, the best thing to do is to contact our office as soon as possible so that we can assist you in remedying the underlying problem of your debt. By contacting us, we can help you claim any exemptions you are entitled to on the exemption forms, we can help you understand your options, and we can file bankruptcy to permanently eliminate your debt. Should you choose to file bankruptcy, know that the sooner we file your case, the sooner the garnishment or levy stops. Also know that in some cases we can even get some or all of the money garnished or levied back after your bankruptcy case is filed. (This requires that your bankruptcy case claims federal exemptions of your assets, that we can claim the money taken from you as exempt in your bankruptcy case, and that the creditor took more than $600 from you during the 90 days before your bankruptcy case was filed).