Education for Justice FACT SHEET C-4 Fall 2008

GARNISHMENT

AND YOUR RIGHTS

Garnishment is when someone collects money you owe by taking it out of your bank account or your paycheck. They cannot do this unless they win a judgment against you in court or served you with a lawsuit that you did not answer. In some cases your money cannot be garnished. Money that cannot be garnished is called “exempt”. You will have to fill out papers claiming that your money is exempt. 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 of it.

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. Many of these are rip-offs!

CAN MY BENEFITS BE GARNISHED?

Usually, public assistance benefits cannot be garnished by creditors. It is called “relief based on need.” Relief based on need includes programs like:

· Note: This list does not include all programs that are relief based on need. At least 2 courts in Minnesota have ruled that EITC (Earned Income Tax Credit) money is exempt from most garnishments.

Other programs like Social Security RSDI and Veterans Benefits are also exempt from garnishment. If you are not sure if the benefits you get are exempt talk to a lawyer.

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:

· Up to 15% of your social security retirement, disability or survivor benefits can be garnished to pay for government-related debts like child support, student loans and income taxes as long as you get a minimum of $750 each month. 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 MFIP Overpayments.

CAN THEY TAKE MONEY FROM MY BANK ACCOUNT?

Yes, unless the money is exempt. If your bank account is garnished, you won’t be able to use your money in your account. It will be “frozen” while you claim your exemptions. You do not get a notice before this happens. The bank sends you a notice after the money is held. The notice tells you your rights about exemption. It will take time before your bank will release your funds.

If you have written checks or have automatic payments—they may bounce!! 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 from these things is protected from most types of consumer debts like credit cards and medical bills.

· Exempt wages 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?”

· If a bank or financial institution is trying to take money you owe out of another account you have with them call a lawyer right away.

HOW DO I CLAIM A BANK ACCOUNT EXEMPTION?

You will not get any warning before your account is frozen. 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. If the company does not object to your claim in 7 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 continue to hold your money, and you will not be able to use it.

CAN THEY TAKE MONEY OUT OF MY PAYCHECK?

They cannot take money from your paycheck if:

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

Note: Courts in Minnesota have ruled that EITC (Earned Income Tax Credit) money is exempt from most garnishments. One court has ruled that MinnesotaCare is relief based on need.

· You were an inmate in 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 take-home wages as long as you still get a minimum of a $262 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 wages 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 wages are exempt, fill out the exemption notice that comes with the letter. Hand hand-deliver one copy to the person or company who is garnishing you and one copy to your employer. Do this as soon as possible. If you do not 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 FOR MY PAYCHECK OR BANK ACCOUNT?

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 about your exemption claim, they must object to your claim. If they object, they must send you a form that lets you ask for a court hearing to see if your money is exempt. If they object or refuse to release your money, go to your courthouse to ask for an “exemption hearing.” You can go to the hearing without a lawyer. Remember to bring any documents that will help prove your exemption.

IMPORTANT: If you do not 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

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