Can a Creditor Garnish a Bank Account While Your Wages Are Being Garnished?
Each state has its own statute of limitations on how long a debtor is legally responsible for a debt. If this time period has not expired, the creditor can pursue you for the money. If you have unpaid debt, it's wise to understand if a creditor can garnish your bank account while your wages are being garnished.
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Significance
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A creditor must sue you in court and obtain a judgment against you before it can garnish your wages or your bank account. Once the judgment is entered by the court, however, the creditor can pursue several methods to collect on that debt. Title III of the Consumer Credit Protection Act allows for the garnishment of a percentage of your paycheck, depending upon the reason for the garnishment. Garnishments are generally limited to up to 25 percent of your disposable earnings but garnishments for past due child support payments can go as high as 50 to 60 percent.
Considerations
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Unless the garnishment is based on a bankruptcy court order or for state or federal back taxes, creditors cannot garnish 100 percent of your check. If the amount the creditor garnishes your paycheck is insufficient to cover the amount of the judgment against you, the creditor has the right to pursue other assets, including money in your bank account. Certain federal funds in your bank account may be exempt from garnishment, such as Social Security and unemployment insurance.
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Warning
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Judgments have their own individual statute of limitations. Depending upon the state you live in, creditors can collect on a judgment for many years after it's issued by the court. In Colorado, the statute of limitations on judgments is 20 years. If you quit your job to avoid a wage garnishment, the creditor can seek to have a new garnishment order issued for your next job any time within this time period. It also can continue to garnish your bank accounts during this time until the debt is satisfied.
Solutions
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Garnishments are based upon judgments for unpaid debt. If a creditor has a judgment against you, consider contacting the creditor directly to work out a payment plan, suggests the Federal Trade Commission. Informing the creditor of your financial situation upfront may allow you to settle the debt for less than you owe. Even if the debt has been sold to a collection agency, you may fare better by offering money to the agency than running the risk of having the agency remove it from your bank account.
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References
- Bankrate; State Statutes of Limitations for Old Debts; Lucy Larony; January 2004
- United State Department of Labor: Wages and Hours Worked: Wage Garnishment
- Bankrate; Feds Protect VA Wages From Bank Garnishment; Steve Bucci; September 2011
- Card Report: Statute of Limitations on Judgments
- Federal Trade Commission; Knee Deep in Debt; February 2011
