Education for Justice

FACT SHEET C-4

Fall 2011

GARNISHMENT

AND YOUR RIGHTS

Garnishment is when someone freezes money in your bank account or your paycheck to get back money they say you owe to them. They can’t do this unless a court gives them a judgment against you or they served you with a lawsuit that you did not answer. You may not get a warning before the garnishment happens. Sometimes, your money is protected – this is called “exempt” or an “exemption.” They can’t take exempt money from you.

There are 2 exemptions that are automatic.

Your employer can’t garnish money from your paycheck if you earn less than $290 a week. If you earn more than $290 per week, 75% of your earnings after taxes are automatically protected.

Your bank account can’t be garnished if you have automatic deposits of Social Security (RSDI), SSI or other Federal exempt benefits and your account has less than two months’ worth of benefits.

The other exemptions talked about in this fact sheet are not automatic. You have to send an “Exemption Claim” to protect your money. The form for this will be mailed to you. Use this fact sheet to see if your money and property is exempt.

If your money is not exempt, try to work out a deal with the company or person that has a judgment against you. They might accept a payment plan, or even payment of less than the full amount. If you make a deal, be sure it is in writing and signed by both sides. Keep a copy.

A non-profit debt counseling agency like Consumer Credit Counseling can help. Call 1-(800) 388-2227 for a local office. Watch Out for companies that charge money to “repair” your credit or tell you to stop paying. Many of these are scams!

Can My Benefits Be Garnished?

Usually, government assistance based on need can’t be garnished by creditors. Assistance based on need includes programs like:

Note: This list does not include all programs that are assistance based on need. Courts have also ruled that EITC (Earned Income Tax Credit) money is exempt from most garnishments. There are other programs that are based on need that may make it possible for you to claim an exemption. Examples of this include the School Lunch Program and Minnesota Family Planning Program. If you have questions about whether you qualify, call your local legal aid office.

Other programs like Social Security (Retirement, Survivor or Disability Insurance) and Veterans Benefits are also exempt from garnishment. This money is automatically protected when you have less than 2 months’ of benefits in your account. If you have more than 2 months, the extra can be frozen – it is still protected but you will have to claim the exemption to get it unfrozen. If you are not sure if your benefits are exempt talk to a lawyer or call your local legal services office.

BUT, there are times that this money is NOT safe. Get advice from a lawyer if someone has threatened to take your benefits.

For example:

· Sometimes social security benefits can be garnished to pay for debts like child support, student loans and income taxes. You must get a warning from the U.S. Treasurer before this happens.

· Also, your benefits can be reduced or stopped if your county decides that you got benefits that you shouldn’t have. See our fact sheet G-8 MFIP Overpayments.

Can They Take Money From My Bank Account?

Your bank account can’t be frozen and the bank can’t charge you garnishment fees if all of these things are true:

If you get: Social Security, SSI, Veteran’s Pension, Federal Railroad Retirement, Civil Service Retirement, or Federal Employee Retirement System benefits

If these benefits are auto-deposited into the bank account

You don’t transfer these benefits to a different account, and

The account balance is less than twice your monthly benefit. (For example, if your monthly benefit is $1000 (2 x $1000 = $2,000), then $2000 is automatically protected.)

If these things do not apply, then a garnishment will freeze the money in your bank account. You may not get a notice before this happens. You can still get your money back if you show it is exempt but you won’t be able to use your money in your account while it is frozen.

If the creditor has a judgment against you then they don’t have to give you a warning before they garnish your account. The bank will send you a notice after the money is frozen. The notice tells you your rights about exemption and will have forms you can use to claim your exemptions.

The creditor might be able to garnish you before they get a judgment if you did not answer a summons and complaint. In this case they must give you a notice before they garnish your funds. If you get a notice before garnishment, you can claim your exemptions before the garnishment to try and avoid it. If you have defenses (reasons or proof that you don’t owe the money) you might also be able to respond to (answer) the lawsuit and explain why you don’t owe the money. See our fact sheet C-2 If You Are Sued.

If you have written checks or have automatic payments—they may bounce if your account is frozen!! It will take time before your bank will release your funds. Talk to the people you wrote checks to and tell them about the problem. If you have set up automatic payments, these will bounce also. Cancel your automatic payments! Talk to the bank manager about what is happening. They might agree to cancel overdraft charges.

· Money in your bank account is protected from most types of debts if your money is from:

· Gifts, and other peoples’ money, are not protected from garnishment when they are put in your bank account. BUT, if you have a joint account, the other person’s money is protected if they don’t owe the debt. Talk to a lawyer right away.

· Exempt earnings only stay exempt for 20 or 60 days after you deposit them in the bank. See section below “Can They Take Money from my Paycheck?”

How Do I Claim A Bank Account Exemption?

If the creditor gives you a notice that you might be garnished, follow the instructions in the notice right away. If your income is exempt, send proof of your exemptions to the creditor. Keep copies of what you send.

The bank must send you a written notice and exemption forms after the money in your account has been frozen. If your money is exempt (see above) fill out BOTH exemption notices. Give one copy to the person or company who is garnishing you and one copy to your bank. You must send a copy of your bank statements for the past 60 days to the creditor with your exemption claim. If your bank statements don’t list where the money from a deposit comes from, you should also send deposit slips or other proof that the money came from an exempt source.

If the creditor does not object to your claim in 6 business days, the bank should put the money back into your account. If the bank does not get your exemption notice within 14 days, it will keep holding your money or give it to the collector. You can still claim your exemptions after 14 days and after the money is sent to the creditor, but it will take longer to get your money back.

Can They Take Money Out Of My Paycheck?

They can’t take money from your paycheck if:

· You are getting or got government assistance based on need in the last 6 months (see section on benefits above)

· You were an inmate in jail or a correctional institution in the last 6 months.

These 2 exemptions protect your paycheck for 60 days after you deposit it in your bank.

I don’t have those exemptions. How much can they take?

Most of your paycheck is protected - even if you are not exempt. Usually, your paycheck can only be garnished up to 25% of your after-tax earnings as long as you still get a minimum of a $290 per week.

· ONLY 20 DAYS: This “25% limit” also applies to paychecks deposited into your bank account – but only for 20 days. Example: if you deposit a $1000 paycheck into your bank, $250 can be garnished right away and the other $750 could be garnished after 20 days.

· BUT- if the garnishment is for child support, then up to 65% of your earnings can be withheld.

· NOTE: If you are an independent contractor or if you own your business, then these wage exemptions may not apply. You should talk to a lawyer to see if this applies to you

How Do I Claim A Paycheck Exemption?

You should get written notice at least 10 days before your paycheck gets garnished for the first time. Find out if your money is exempt (see above). If your earnings are exempt, fill out the exemption notice that comes with the letter. If you can, hand-deliver 1 copy to the person or company who is garnishing you and 1 copy to your employer. Otherwise you can mail it. Do this as soon as possible. If you don’t do it within 10 days, you can still claim the exemption, but it will take longer to stop the garnishment and get your money back.

What Happens After I Claim An Exemption?

You can call the creditor and ask when they will tell your employer or bank to give your money back. The creditor might ask you for more information or proof, like benefits statements. You might get your money returned sooner if you send them the proof that they ask for. You might need to talk to a lawyer to help you prove your exemption claim.

What If The Creditor Objects?

If the creditor wants more information or disagrees with your exemption claim, they must object and ask for a court hearing to see if your money is exempt. They will send you a form to tell you the reason for the objection and when the court hearing will be. If you have more proof, you can send it again. It is possible to solve the issue before the hearing.

If you have to go to court but can’t go on the day that is set, you can ask the court to have the hearing on a different day - you need to do this before the hearing. , Remember to bring any documents that will help prove your exemption. If they froze the money in your bank account, be sure to bring bank statements for the last 60 days to the hearing. Also bring proof of where the garnished money came from so you can prove exemptions.

IMPORTANT: If you don’t claim your exemptions or ask for a hearing on time, you can still do it later. You never lose your right to stop a garnishment or to get your exempt money back. Never rely on legal advice from a creditor or debt collector.

Minneapolis Legal Aid – CLE

MN Legal Services Coalition

2324 University Avenue W. – Suite 101B

St. Paul, MN 55114

Don’t use this fact sheet if it is more than 1 year old.

Write us for updates, a fact sheet list, or alternate formats.

Fact Sheets aren’t a complete answer to a legal problem.

See a lawyer for advice.

© 2011 Mid-Minnesota Legal Assistance. This document may be reproduced and used for non-commercial personal and educational purposes only. All other rights reserved. This notice must remain on all copies. Reproduction, distribution, and use for commercial purposes are strictly prohibited.

To find other Legal Aid Society materials, including the fact sheets mentioned in this document, go to www.lawhelpmn.org/LASMfactsheets.

Description: ENVELOPE