- A private creditor cannot automatically garnish your assets without obtaining legal authorization. It must file a lawsuit against you, typically in your county's magistrate or municipal court. The court then gives you an opportunity to contest the lawsuit by proving that the creditor filed the lawsuit incorrectly or that you have already paid the debt; otherwise, it will issue a judgment against you. This allows the creditor to obtain a writ of garnishment to take some of your assets.
- Certain types of debt are exempt from the judgment requirement. Typically, a government entity may garnish your assets without a judgment if you owe delinquent taxes. A student loan lender may also execute an asset garnishment without a court order if you default on federal student loan debt.
- Wages and bank account balances are among the most common types of assets garnished by private and government creditors. In a wage garnishment, the creditor orders your employer to withhold a portion of your post-tax wages from each pay to apply toward your judgment debt. A bank garnishment involves forcing your bank to freeze your account and send non-exempt funds in the account to the court that issued the judgment. Other types of garnishable assets include cash, investments, personal property and real estate.
- Federal and state laws place limits and exemptions on the assets that a creditor may garnish. Creditors can take up to 25 percent of your wages after taxes if you earn more than 30 times the federal minimum wage each week. Some states, like Texas, prohibit wage garnishment for collection of debts other than unpaid child support. Some states impose exemptions on bank garnishments --- for example, Ohio protects $400 of your bank account balance from garnishment. States typically have exemptions on personal property --- Ohio law exempts personal property up to $1,075, and a vehicle valued up to $3,225.
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