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Garnishment a last resort and effective too for creditors looking to collect money from you. However, it can have a devastating impact on you and your finances. If you're having trouble paying your bills, your property, wages or both could be taken from you to pay your bills.

There are several federal and state laws protecting you to make sure garnishment is properly administered and used as a last resort.

You need to know some things about garnishment such as:

• How the garnishment process works
• What types of property or funds can and can't be garnished
• Limitations on how much a creditor can garnish
• How you are protected from unfair practices

How Garnishment Works

Generally, garnishment begins when you stop paying your creditors and they go to court and wins a judgment against you to collect money. This is a court order detailing how much you own and the interest rate paid on the amount.

There may be another court order to make you appear at "supplemental proceedings" where you're required to answer detailed questions about your assets, wages, financial accounts and other property.

If the court determines that you need to pay and you don't have the money at that time, the court can allow the creditor to garnish, or take money from, your property or wages. Then, the creditor must send you a garnishment notice containing:

• A clear statement that garnishment has been authorized
• A description of any "exemptions" from garnishment, what the creditor can't take
• Procedures to follow to contest the garnishment; You'll be given the chance to go to court and explain why garnishment should not be allowed

Finally, the creditor takes the judgment and garnishment order to the local sheriff and has them help get it applied or levied

Generally, a creditor isn't interested in garnishment if there's nothing that can be taken to pay the judgment, such as:

• A vehicle
• Regular wages
• Bank accounts

Vehicle garnishment can lead to repossession, but in many states, creditors aren't allowed to repossess and sell vehicles if the equity in the vehicle (it's worth minus what's owed on it) is under a certain amount (around $2,000 or a little more in most states).

In many states a lien is placed on the vehicle to secure payment. Lien laws, rather than garnishment laws control how a car, truck, boat, etc., is accessed.

Wage garnishment is when the sheriff presents your employer with garnishment papers, ordering the employer to take out a certain amount each time you're paid until the debt is paid off. The law requires your employer to withhold the correct amount from your paycheck or they be legally liable for it.

Usually, a creditor will opt for wage garnishment if you're working steadily at more than the minimum hourly wage and don't already have other garnishments against your wages.

Limitations on Garnishments

Federal law allows creditors to only take a specified amount from your paycheck(s) based on a percentage of your "disposable earnings." This is your pay minus required deductions, like state and federal taxes and Social Security withholdings.

Income that cannot be garnished is:

• Social Security benefits
• Retirement plan benefits
• Public assistance benefits

And, unless the judgment is for child or spousal support, your income can't be garnished if it comes from:

• Workers' compensation awards
• Unemployment or disability benefits

Federal law gives you another protection: You can't be fired because a garnishment judgment for one debt. Your employer could be punished for violating the law, including fines of up to $1,000 and imprisonment for up to one year. However, you can be fired for having more than one wage garnishment.

Finally, it usually doesn't matter if the funds or money that are normally exempt are deposited into a bank account, so long as the money remains readily available for your day-to-day needs. So, if you deposit your Social Security benefits into your checking account, they can't be garnished. But, if you put them into some type of permanent investment, then a creditor might be able to garnish them.

Child and Spousal Support

Veterans' benefits, military retirement, most workers' compensation benefits, and Social Security old age, survivors' and disability benefits can all be garnished if this is for a child or spousal support judgment. Also, the percentage of your disposable income is higher than it is for other types of garnishment payments.

Garnishments in Bankruptcy

Garnishment can be stopped if you file for bankruptcy through the automatic stay process. You'll then receive your full paycheck and possibly completely "discharge" or erase the debt, but you'll have the bankruptcy charge on file, which can hurt you in other ways.

Questions For Your Attorney

• A creditor is threatening to sue me and garnish my wages. Is there any way I make a deal with the creditor?
• I work part-time and go to school part-time. Can one of my creditor's garnish my wages? If so, for how much?
• I'm pretty sure a creditor is going to end up garnishing my bank accounts. Can I empty those accounts and hide the money?

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