At present four U.S. states—Pennsylvania, North Carolina, South Carolina, and Texas—do not allow wage garnishment at all except for tax-related debt, child support, federally guaranteed student loans, and court-ordered fines or restitution.
Bank garnishment is legal in all 50 states. However, four states prohibit wage garnishment for consumer debts. According to Debt.org, those states are Texas, South Carolina, Pennsylvania, and North Carolina.
Yes. A garnishment is based on a court order. called a judgment, that grants one party or the other a monetary award. A state court judgment entered in one state is enforceable in another under the Full Faith and Credit Clause of the US Constitution, Article IV, Section 1.
Bank accounts solely for government benefits
Federal law ensures that creditors cannot touch certain federal benefits, such as Social Security funds and veterans' benefits. If you're receiving these benefits, they would be exempt from garnishment.
With few exceptions, if the garnishment order originated out-of-state, and that state's court has personal jurisdiction over the employer and has issued proper service, as reported by the National Law Review, the garnishment order is valid and enforceable over the wages owed.
Ordinary garnishments
Under Title III, the amount that an employer may garnish from an employee in any workweek or pay period is the lesser of: 25% of disposable earnings -or- The amount by which disposable earnings are 30 times greater than the federal minimum wage.
The court will apply the relevant means test before it makes an order for garnishment. Certain types of income cannot be garnished or frozen in a bank account. Foremost among these are federal and state benefits, such as Social Security payments.
What Accounts Can the IRS Not Touch? Any bank accounts that are under the taxpayer's name can be levied by the IRS. This includes institutional accounts, corporate and business accounts, and individual accounts. Accounts that are not under the taxpayer's name cannot be used by the IRS in a levy.
If wage garnishment means that you can't pay for your family's basic needs, you can ask the court to order the debt collector to stop garnishing your wages or reduce the amount. This is called a Claim of Exemption.
A levy allows the creditor to take funds directly from a bank account to satisfy unpaid debts or taxes. In most cases, levies are permitted only by court order as part of a lawsuit judgment. However, certain government agencies, including the Internal Revenue Service, can levy a bank account without a court order.
Ultimately, if a creditor wishes to pursue garnishment of a bank account in another state, they must generally initiate separate legal proceedings in the state where the bank operates. One of the best strategies to protect cash accounts is to deposit funds in an out-of-state bank whose laws do not permit garnishments.
This simply means that the authenticity of that debt – and their legal right to pursue it – will have to be verified by the court in the original state and the new state. Once this process happens, your wage garnishment will be considered valid in the new state and will proceed as normal.
Protections for Low-Income Debtors
California law offers additional protections if your income is very low, in which case your wages are fully exempt from garnishment. This means that if you earn minimum wage or close to it, creditors cannot garnish your wages at all.
There are several options for stopping a wage garnishment. One, you can quit your job. Your creditor won't get your money, but neither will you. Two, you can pay the debt in full.
If a judgment is entered against the debtor in one state, but the debtor resides in another state or the debtor's assets are located in another state, then the creditor must transfer the judgment to that state.
Grounds to challenge a garnishment typically include: The garnishment being issued in error. The property being garnished is exempt. The garnishee's response to the garnishment is incorrect.
Exceptions to the 7-Year Rule
While the 7-year rule applies to credit reporting, it doesn't always shield you from wage garnishment. Certain debts can lead to garnishment beyond seven years: Federal student loans. Unpaid taxes.
State Garnishment Laws
While all states allow wage garnishment for child support and unpaid state taxes, four states — North Carolina, Pennsylvania, South Carolina and Texas — don't allow wage garnishment for creditor debts.
About bank levies
Some kinds of deposits can't be taken (they're exempt), like Social Security or Supplemental Security Income. Exemptions From the Enforcement of Judgments (form EJ-155) has a complete list. Enough money to meet basic needs must be left in the account.