If a creditor sues you and gets a judgment, it has a whole host of collection methods available to get its money from you, including wage attachments, property levies, assignment orders, and more. Fortunately, in many situations you can still take steps to try to head off collection efforts. Read on to learn how to prevent a judgment creditor from taking your income or property.
(Learn what collection methods judgment creditors can use in How Judgment Creditors Enforce Judgments.)
Here are some ways you can head off a creditor’s collection attempts.
It’s never too late to negotiate. The process of trying to grab property to pay a judgment can be quite time-consuming and burdensome for a judgment creditor. Also, the creditor might fear that you’ll lose or quit your job due to a wage attachment, or that you’ll file for bankruptcy. None of that would help the creditor get paid.
A judgment creditor who receives a reasonable offer to pay will often stop a lien, levy, wage attachment, garnishment suit, or assignment order. (For tips on negotiating with creditors, see Debt Settlement & Negotiating With Creditors.)
You might consider contacting a debt counseling agency for help in negotiating and setting up a repayment plan. (Unfortunately, credit and debt counseling scams abound. Take precautions when looking for a legitimate debt counseling agency.)
Most important, just because a judgment creditor levies on your property or attaches your wages, it doesn’t mean that the creditor is entitled to take the property. Every state exempts certain property from creditors. This means that creditors simply cannot have that property, no matter how much you owe. In addition, you may be able to keep property that isn’t exempt if you can prove to the court that you need it to support yourself or your family.
In most states, your clothing, furniture, personal effects, and public benefits can’t be taken to pay a debt. Nor can some of the equity in your car and house, most of your wages, and most retirement pensions.
Any time the sheriff or marshal levies against your property, you must be notified. You can request a hearing, which is usually called something like a claim of exemption hearing, to argue that it will be a financial hardship on you if the property is taken, or that your property is exempt under state law. If you lose that hearing and your wages are attached, you can request a second hearing if your circumstances have changed, causing you hardship (for example, you have sudden medical expenses or must make increased support payments).
In most states, you cannot request a claim of exemption to protect your wages if your debt was for basic necessities, such as rent or mortgage, food, utilities, or clothing. The law says that you should pay for your necessities, even if you suffer a hardship in doing so.
Still, you can request a claim of exemption hearing if the debt (now part of the judgment) was for a basic necessity. The creditor may not challenge your claim. Or, the judge might not care whether the debt was for a basic necessity and may consider only whether or not you need the money to support your family.
Here is an overview of how a claim of exemption hearing normally works:
When your employer notifies you of a wage attachment request, or you are notified of a property levy (such as a bank account attachment) or an assignment order, you will be told in writing how to file a claim of exemption -- that is, how to tell the judgment creditor you consider the property unavailable. The time period in which you must file your claim is usually short and strictly enforced -- don’t miss it.
Complete and send a copy of your claim of exemption to the judgment creditor. In some states, you’ll also have to serve it on the levying officer, such as the sheriff. The judgment creditor will probably file a challenge to your claim. The judgment creditor may abandon the attachment, levy, or assignment order, however, if it’s too expensive or time-consuming to challenge you. If the creditor does abandon it, your withheld wages or taken property will be returned to you.
If the judgment creditor doesn’t abandon the attachment, levy, or assignment order, the creditor will schedule a hearing before a judge. If you don’t attend, you’ll probably lose. On the day of the hearing, come early and watch the way the judge handles other cases. If you’re nervous, visit the court a day earlier to get accustomed to the surroundings.
At the hearing, you’ll have to convince the judge that your property is exempt or that you need it to support yourself or your family. This is your opportunity to defend yourself from having your wages or other property taken. You must do all that you can to prepare for this hearing if you want to keep your property.
For example, if the creditor tries to take your “tools of trade,” which are exempt to a certain value in most states, bring along someone who works in your occupation. A supervisor, union boss, or shop leader can say that you use the items in your job. You’ll need to show that the items’ value does not exceed the exemption amount. If you have high income one month, bring in pay stubs to show that you usually make less. Or, if your bills are higher than average, bring copies. Think carefully about your income and financial situation. There may be other creative but truthful ways to show the judge that your property is exempt or necessary to support yourself or your family.
The judge will listen to both you and the judgment creditor, if the judgment creditor shows up. Sometimes the judgment creditor relies on the papers already filed with the court. The judge may make a ruling or may set up an arrangement for you to pay the judgment in installments.
This is an excerpt from Nolo's Solve Your Money Troubles, by Amy Loftsgordon and Cara O'Neill.