Many times people mistakenly believe there's nothing they can do when creditors garnish their wages or take money out of their bank accounts. However, that's not true at all. If your money or assets qualify for an exemption, you can stop the garnishment and get back what the creditor took by filing a Claim of Exemption with the court. Here's what you need to know to accomplish this.
A garnishment allows a creditor to take money out of your bank account or, depending on the creditor and state, up to 25 percent of your paychecks—and up to 60 percent if your debt is past due child support.
However, state and federal garnishment laws restrict creditors from touching certain types of income and assets. Though the list may differ slightly from state to state and between state and federal statutes, in general, creditors cannot garnish income from
- Social Security benefits
- Social Security disability
- Supplementary Security Income (SSI)
- Disbursements from student loans, grants, or work assistance
- Benefits from SNAP or other food assistance programs
- Electronic Benefits Transfers (EBT)
- Workers' Compensation benefits
- Unemployment benefits
- US Civil Servant Retirement benefits
- ERISA-covered pensions
- Individual Retirement Accounts (IRAs)
- Money paid to your spouse or children from a life insurance policy
- VA benefits
There are a couple of exceptions to this list. The state and federal government can garnish money from Social Security disability and retirement funds to pay tax, student loan, child support, and alimony arrearages. Any creditor can grab funds from your pension once they're deposited into your bank account. Money from Social Security Insurance is untouchable by anyone.
Most creditors will avoid directly garnishing the checks you receive from these sources of income. However, they may inadvertently grab exempt monies when they are deposited into a bank account, since it's impossible for them to know where that money came from.
How to File for an Exemption
While filing for an exemption is a fairly straightforward process, the window of opportunity to do so is fairly short if you want to stop a creditor from dipping into your income or bank account in the first place or recover money that was recently deducted by not sent to the creditor. You only have 10 business days from the date the Notice of Execution of the garnishment was mailed to you to file a Claim of Exemption with the court and 25 days to get a copy to the law enforcement office (typically the sheriff's office) that is holding the funds from the garnishment.
If you wait too long, the money will be given to the creditor, and getting it back may cost more time and money than you have available.
Generally, you can obtain a Claim of Exemption form from the court. More conveniently, you can usually download a copy of the required form from the Internet. Some jurisdictions even allow you to submit the form online. Use the method that's most convenient for you. Additionally, be prepared to pay a filing fee. Usually, the filing fee is around $8, but it may cost more or less depending on where you live.
When submitting the form to the court, include copies of your evidence with the petition such as check stubs or benefit letters. Creditors can object to your exemption request, but they may be less likely to do so if the proof of your claim is staring them in the face.
If the creditor does not object, the garnishment will be cancelled and the sheriff's office will send any money it collected back to you if it hasn't already sent it to the creditor. If the creditor does object, a court hearing date will be set where you and the creditor will argue your cases before a judge who will decide whether your exemption is valid or the creditor can get the money garnished.
Winning your claim is no guarantee against future garnishment attempts. The creditor can continue trying to garnish your wages or bank account for as long as the statute of limitations allows. The only ways to permanently get rid of the garnishment threat is to either pay the debt off or file for bankruptcy. If you're being harassed by creditors or dealing with companies garnishing your income, visit resources like http://www.wflaw.net for information about your options.