What is a Wage Garnishment?
Garnishment is a legal procedure by which a creditor can seize assets (i.e., cash, property, etc.) from a debtor (Normally, a third party is "garnished," as to intercept the money from the garnished party.) through an order and in connection with a lawsuit. The most common type of garnishment is wage or earnings garnishment. Wages or earnings are garnished if the judgment creditor regularly collects from a third-party defendant , but the third-party simply refuses to pay the judgment creditor.
In Indiana, garnishment is often used in conjunction with a money judgment. After a judgment is obtained against a debtor, a creditor can file a motion seeking to garnish the debtor’s wages, bank account, or certain insurance policies. There are numerous garnishment rules and laws, both federal and state, that apply to garnishment requests in Indiana.
Overview of Indiana Garnishment Laws
Indiana garnishment laws are the most straightforward within the United States. This is because they are purely statutory, and there is little room for a court to make its own interpretation. These laws came about due to House Bill 1145 which was signed into law on May 5, 2013 and took effect on July 1, 2013. Prior to that, the law related to garnishments in the state of Indiana was much less clear.
The basic concepts surrounding garnishment have not changed much. A creditor seeks a court order after they have a judgment against a debtor for the amount that the creditor is owed. From there, a garnishment is served on a third party (usually the debtor’s bank or employer) to place a hold on the debtor’s accounts or income. The garnishment requires the third party to send the creditor the portion of the debtor’s money or income required to satisfy the judgment. Filing for these garnishments assumes that the debtor has money in his or her account or that he or she is receiving a wage. In general, Indiana garnishment courts are educated on the law, due to how frequently such orders are sought. They will either grant the order or deny it based on whether the statute has been followed correctly. That said, there may still be instances where a creditor is denied a garnishment unless they have representation. The first issue a creditor must be aware of is what the relevant state’s law says about obtaining a garnishment. In Indiana, applicants for garnishment can only get a single writ unless there is one that was issued in a time period of at least the past 45 days. After that point, they can have as many writs as they want. They can also serve a single garnishment on multiple accounts or on a third party if the creditor has just one judgment — this includes multiple employers if they are garnishing income or multiple banks if they are placing a writ on a debtor’s funds and assets. In addition to the number of times a garnishment can be issued, creditors must be aware of what is exempt from garnishment or the holding of a third party. Indiana law allows $350 from a bank account to be freely used, $352.50 in income plus $1079.85 per year for child support, and $300 in a retirement account. For retirement accounts, all deposits must be made by the employer to be eligible for exemption from garnishment. Creditors should consult with a local attorney regarding the specifics of their garnishment order and the garnishment laws of Indiana.
Indiana Garnishable Debt Types
Not all debt collectors are created equally. Court costs, child support, attorney fees, and more, are all subject to Indiana garnishment. For example, when a plaintiff wins a lawsuit against you, their judgment is a court-ordered obligation that is subject to wage garnishment.
I’ll go deeper into this topic in an upcoming chapter, but I wanted to give you an overview of some of the types of debts that can lead to wage garnishment in Indiana.
Credit card debts
Medical bills
Back taxes
Court costs
Attorney fees
Child support
Unpaid student loans
Maximum Indiana Garnishment Amounts
Garnishment is powerful tool, both for debtors and creditors. Creditors can force the collection of debts by garnishing wages and other income, while debtors can rid themselves of a debt by "claiming exemption" from garnishment. It is critical, however, to know what limits the Indiana courts place on garnishment amounts: The amount that may be garnished from wages is capped at 25% of disposable income that is not exempt from garnishment. Disposable income is essentially income – such as wages or salary – that is not required to support the debtor’s necessarily living expenses. In other words, it is income the debtor can afford to lose. It is important to note that while 25% is the maximum amount that may be garnished under Indiana law, this does not mean that only 25% may be garnished. It simply means that any portion over 25% is subject to legal challenge.
Under Indiana law, a debtor can claim an exemption from garnishment by pointing to a statute that actually exempts certain property from the grasp of creditors. In Indiana, the following types of property are exempt from garnishment (although the properties are subject to lien foreclosure): A bank account contains whatever money exists in the account at the time the court issues an order of attachment. Unlike a garnished wage or salary, the balance of the account is not subject to exemption claims; instead, the full amount is subject to the garnishment/attachment.
Indiana Garnishment Process
Court Process
The garnishment procedure begins with the filing of a motion in the court where the underlying case or debt was decided. The creditor is then ordered to provide the trial court with information on the garnishee (i.e., the employer) and a notice of garnishment.
Notice of Garnishment
After establishing the garnishee’s name and address, the creditor sends the trial court the necessary notices and garnishment paperwork. The court then notifies the garnishee of the proceeding by mailing a copy of the notice of garnishment to the garnishee at the designated address. At that point, the garnishment process has legally begun.
Potential Creditor/Third-Party Mailings
While the law does not require a creditor or third-party garnishee to send a notice of garnishment to any other party, the court may require that copies of the garnishment order are sent to other parties, such as the garnishee, when the creditor files his or her motion.
If the creditor files a motion with the court requesting that other parties obtain copies of the garnishment proceedings, the trial court will regularly order the creditor to serve said parties at their addresses on file with the court. The court will also require creditors to provide other parties with copies of any motions, petitions, and applications for garnishment filed with the court. The creditor financially responsible for all mailings.
Debtor Protections under Indiana Law
Debtors are entitled to certain legal protections in Indiana. Rather than leaving the decision of what to provide the debtor on the part of the employer, the Indiana law is fairly specific.
For example, if a debtor’s "disposable earnings" (check the definition against the federal limits) are less than $75 per week then no garnishment will issue from the Court (this is the minimum that can be garnished under 15 USC § 1673). Further, very low income debtors can elect to keep the entire amount exempt from garnishment. If a debtor makes 150% of the federal poverty line then the debtor’s entire disposable earnings are exempt from garnishment. For a single person in 2018 the 150% limit is $1,581.25 per month. For 2 people it is $2,141.67. The limits increase by $484.58 per month for each additional person up to 6 persons. For example, a four person household is $3,149.17 per month. An 8 person household is $5,856.67 per month.
If the debtor’s disposable earnings exceed the 150% limit then the excess can be garnished. For example, if the debtor’s disposable earnings are $2000 per month then $418.75 would be exempt ($75 + $343.75) and $581.25 could be garnished. If the debtor’s disposable earnings are $5,000 per month then $3,201 . 25 ($75 + $343.75 + $2,781.25) could be garnished.
There are also legal protections for debtors in determining the amount that can be garnished from wages. First, the creditor has the burden of proof to establish the amount that may be garnished. Second, once there has been one garnishment hearing (the hearing requested by the creditor) the matter cannot be re-litigated by the debtor. In other words, each creditor can only garnish a maximum of 25% of the debtor’s disposable earnings or the amount established at the garnishment hearing.
Lastly, the employer has certain obligations with regards to a garnishment order. First, the employer must provide notice of the State of Indiana’s Garnishment Order and the amount the garnishment is for before garnishing the debtor’s wages. Second, the employer must respond within five days of receiving the garnishment order from the employee with certain information. Third, the employer must set aside money for the garnishment when the company owes the garnishment debtor money (e.g. wages or retirement investments). Fourth, the employer must levy upon the money due to the debtor within ten days of receipt of the garnishment request from the creditor/creditor’s attorney office.
Fighting a Garnishment Order
When served with a garnishment to withhold funds in Indiana, debtor’s have options to fight back. Potential debtor’s rights include the ability to file objections, pursue damages for violations, or even file third party claims to block garnishment.
Filing Objections to Indiana Garnishments
If a garnishment has been filed in Indiana, there are procedures in place for the garnishee and judgment debtor to put the court on notice that the garnishment is improper. The objection must be timely filed and pursuant to Indiana Code (I.C. 24-4.5-5-105). Objections can be filed by the garnishee or the debtor.
When filing an objection, either of the above mentioned parties may file an affidavit or motion for the judge to consider. However, further documentation is typically required and ordered by the court. For example, attorney’s fees or improper garnishments may be ordered by the judge to be paid to the garnishee or debtor.
Payment of Damages for Violations
In the event a garnishee or judgment debtor is mistakenly assessed garnishments then the hearing officer may award payment for damages. Depending on the error, damages could be assessed to the creditor or the creditor’s attorney that made the mistake.
Additional damages can be awarded if an individual is subjected to garnishment after the debt has been satisfied. Damages in this instance include attorney’s fees and costs associated with delaying the proceedings. Parties may appeal the damages awarded.
Third Party Claim
Third party claims are made by a non-client, non-judgment creditor to challenge a garnishment order in Indiana. The claim is submitted through a motion and can be addressed immediately by the judge as it is not filed by either of the parties in the garnishment action. A third-party claim must be reviewed by a presiding judge prior to being served to the garnishee.
Once a third party claim is filed, the motion must be served upon the garnishee and/or judgment creditor. Three different forms of service are available| (I.C. 24-4.5-5-108):
With service of the garnishment, hearings are typically held about 45 days after the notice. Creditor and debtor are notified of this hearing date. When a garnishment is contested, either party may incur attorney’s fees to resolve issues that arise at a hearing.
The Indiana garnishment laws are strict, precise and well-defined. When creditors and debtors do not follow all the procedures in a garnishment action there are repercussions.
Credit and Job Impacts of Garnishment
Garnishment can have far-reaching effects on a person’s credit and employment, but there are also plenty of misconceptions about how they impact these areas. One common myth is that having a garnishment on your credit report will prevent you from getting credit in the future. The issue is not that people have incorrect information about garnishment specifically. Rather, the problem often comes with the inaccurate information they have about the broader structure of their credit report. Even though credit garnishment can significantly hurt your credit, for example, it is not a unique mark on your credit. The real issue with credit and garnishment is that the debt already existed and your payment history already showed that you were delinquent. Garnishment just adds another blemish on your report.
On top of that, since credit reports typically only show what has happened over the past 7-10 years, the damage will eventually go away. The damages will not last forever and they do not mean that you will never get credit again.
So, if credit garnishment is not a problem for getting credit, why does it have any impact here? Unfortunately, the answer is simply that since you owe money, lenders are hesitant to lend to you. This is especially true when you have an immediate obligation over which another lender has control. In this case, they have a fiduciary duty to themselves, not you. And since the lender is able to garnish your wages, your chances of getting an additional loan are pretty slim.
Another common misconception about garnishment is that it affects employment rights. There are two places where employers might want to consider garnishment as a factor, however. First, they may be able to terminate you or refuse you based on your status as a debtor. This is usually only possible if you are a public employee. However, public employment is never assured anyway.
The second place where garnishment might affect you is with employment garnishments. Depending on the nature of the garnishment, you may not be able to have that position. For instance, if you are required to drive at work and you have a suspended license, you probably cannot be a commercial driver.
Where to Find Assistance and Information
The emotional and mental effects of garnishments don’t just affect consumers. Creditors, collectors and their attorneys suffer from stress as well as they attempt to collect their debts. This creates a cycle where legal help is necessary throughout.
Statewide, the most effective way to obtain an attorney to assist in defending against garnishments include:
Nationally, there are also several social and legal services that provide assistance to consumers. These can range from assistance with paperwork to legal aid lawyers that take your case for free or a low fee. Here are some resources that may help consumers facing collections and garnishment:
Counseling Services
Both religious and non-religious organizations offer financial counseling and/or assistance with charitable donations to cover garnishments . Here are some resources:
Legal Aid
The Indiana Bar Association offers free referrals and legal information by phone. They can be reached at (317) 639-5465 or toll-free 1-800-266-2581. Bankruptcy filings for those who cannot afford an attorney are handled through the Legal Services Corporation and its state affiliates.
Consumer Bankruptcy Project
University legal aid clinics offer a broad range of legal services, including but not limited to bankruptcy proceedings. The Consumer Bankruptcy Project was designed to provide in-house legal assistance to low-income consumers in Indiana. They also assist out-of-state individuals with filed lawsuits against Indiana garnishments.
Whether you are a consumer or collector, garnishments and defenses are complex with numerous ways to be resolved regardless of the situation.