Garnishments: How They Work

Collection activities run in a fairly common or consistent timeline. Once a debtor has ceased paying on their debt, most institutions will collect on their debts themselves. When an institution is no longer able to collect on their debts, they will turn the debts to a secondary collector. Secondary collectors are collectors that collect on behalf of numerous lending institutions.

Usually secondary collections attempt to collect by way of barraging the debtor with numerous phone calls, letters and, at times, offers of settlement on less than favorable terms. If secondary collectors are unable to collect on this debt, the debt is then referred for another round, with a different company, performing secondary collections. This second round of secondary collections is usually very similar to the first round.

At any time, these debts may be sold to private collectors. Private collectors tend to buy debts in large blocks and then farm them out to their staff. Their staff usually take approximately one quarter of the monies received with the remaining balance going to the person who bought the principal of the debt. When all forms of secondary collection have proved fruitless for the collector, the debts are generally referred to law offices for collection.

Law offices begin their collection processes by issuing what are known as dunning letters. A dunning letter is a letter designed to be scary and intimidating. These letters usually have bold law firm letterhead at the top, capitalized, if not bolded letters, stating that the debtor must comply and pay the debt owed or that the debtor will be sued in civil court.

If a debtor continues not to pay the debt, law firms generally will then file actions in County Courts to recover debt. The debtor will know that they have been sued in County Court when they receive a summons to appear at a hearing, usually about 30 days after the summons is issued accompanied by a complaint. The complaint will outline the debt that is being sued on, the reason for suit and the time and date of hearing. At that hearing date, debtors will be issued a judgment against them denoting the exact amount of money owed, to whom it is owed and what Court ordered interest rate will apply to that debt till paid.

At any time following a judgment, debtors can have their wages garnished, their bank accounts garnished or have liens placed on title-able property in their possession. When wages are garnished, they are typically garnished at a rate of 25% of the debtor’s net income. Meaning that one quarter of everything that the debtor brings home will now be taken out of their paycheck and applied to their debt with the Court. Understandably, many debtors do not feel that they can provide for themselves or their families minus one quarter of their paycheck.

To stop a garnishment a debtor can file their bankruptcy at any time in the process. If a bankruptcy is filed prior to garnishment, the garnishment will not go into effect. If a debtor finds themselves already being garnished, then they can file a bankruptcy and stop the garnishment where it is. In the unlikely and unusual event that a debtor files a bankruptcy and the garnishment continues, any monies taken illegally after the date of filing must be returned to the debtor as soon as it is practicable.


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