Can a Collection Agency or Other Creditor Garnish Wages?

The simple answer is yes. However, the collection agency can’t just go out on a whim and garnish wages. They have to follow the rules of the game. The collection agency must properly file a lawsuit, ensure that the debtor is properly served a valid summons and/or complaint for lawsuit and then win a judgment against the debtor. A summons is a court issued notification to the debtor that he or she is being sued and must appear in court. Most of the time a summons is served by a process server or a local sheriff’s officer. Wage garnishments for local, state, or federal taxes, student loans, and child support do not require a court order or lawsuit. Unfortunately, the tools at a creditor’s disposable doesn’t stop here.

Once a collection agency receives a judgment, it can record the judgment and a judgment lien at the clerk of court office. A judgment lien is attached to any real property of the debtor and certain personal property. When the property is ever sold, some of the proceeds of the sale can be used to pay the creditor that obtained the judgment lien. Recorded judgment liens can last up to 20 years in many states and can also be renewed. In addition, judgments are public record and are often reported to credit bureaus.

Now, if a collection agency wants to garnish wages and bank accounts after winning a judgment, it has to file documents through the court to do so. Depending on the debtor’s state of residence, the collection agent is generally permitted to garnish up to 25% of net wages from a paycheck. The debtor will receive a notice from his or her employer or bank if this going to occur. This is a bit of a digression, but Uncle Sam can take more than 25% if back taxes are owed to the IRS. The state can take more if child support payments are garnished.

The worst thing that a debtor can do is to ignore a lawsuit summons and fail to respond and/or appear in court. If this happens, then congratulations: The debtor has essentially handed the creditor a default judgment on a silver platter. Afterwards, the debtor won’t have much legal recourse, unless it can be proven that the lawsuit is invalid or the debtor was not served lawsuit papers. State law gives the debtor a specified amount of time to respond to a complaint by filing an answer.




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