Credit Problems: Judgments and Wage Garnishments
After a judgment is entered against you in court, what happens? First, a sheriff or marshal or other state authority may notify your employer of the judgment and the garnishment. Depending upon the state, the amount garnished will vary, but it is usually a percentage of your paycheck, less certain exemptions offered by state law. Consult the paperwork for the exemptions, but usually there is no exemption for not being able to afford the garnishment.
Certain exemptions differ by state law, but may include a portion of your homestead, certain limited household goods and effects, certain personal property, pensions, insurance proceeds and tools for your work.
With a judgment in hand, a creditor may file a document with your bank, with instruction for the bank to levy your account, or place a hold on your account for the funds due. Depending upon the state, this bank account can be seized many times, but the bank is only usually authorized to withhold what is in the account on the date of levy. [A word of caution: The rules vary here by state and if your judgment is more than several thousand dollars, you should contact member services and speak to an attorney and not rely on this information.]
Furthermore, it is common practice for a creditor to obtain a judgment and hold it. Judgments may be valid for many years depending upon the state law, and interest accrues often from the date of the debt or at least from the date of the judgment if requested by your creditor. It is often commonplace to receive a judgment, originally in the amount of $2,000 which after 15 years may be worth in excess of several thousands of dollars due to the accrual of interest.
Satisfaction of a Judgment or Debt
If you satisfy a debt, you must insist on certain precautions. Do not pay until you have received in writing an agreement to release you from all liability in the future for this debt from all parties or conceivable parties, and in the case of satisfying a judgment, be certain the party agrees to file with the court a satisfaction of judgment of the type required in your state or the state in which the judgment was obtained. Do not pay until these steps are satisfied. If you do not trust the other party, you might consider hiring an independent escrow company to collect your funds and to hold their satisfaction and release documents. As soon as a creditor receives his/her money the incentive to do anything for you is lost.
Not taking care of this debt or judgment at this time, may allow your credit to be damaged, or to have judgment on your credit record. If the creditor were to go out of business or move in the future, you could be prevented from cleaning up your credit record without incurring substantial lawyer fees.
Sending a check marked "paid in full" does not always cover you. Different states require different language and some states allow a creditor to simply cross out the designation and negotiate your check anyway, without agreeing to settle for the amount of your check. Be sure to follow the law in your state.
Points to Remember
- Your employer may be notified of the judgment against you and the garnishment.
- With a judgment, a creditor may have your bank levy your account.
- Creditors may obtain a judgment and hold it, resulting in added interest.