Indiana court judgments or other legal orders to pay money are not toothless; the court system has mechanisms to help creditors collect from debtors who won’t pay. Whenever someone owes money pursuant to a court judgment or order, that debtor can be forced to pay through the process of garnishment. That is when money belonging to the debtor which is in the possession of a third party (called a “garnishee”), or otherwise owed to the debtor by the garnishee, is instead ordered to be paid to the creditor. Probably the best known type of garnishment is wage garnishment, when money owed to a debtor by the debtor’s employer is instead paid to a creditor.
Indiana Garnishment Exemptions and Non-Exemptions
Some types of income are protected, or exempt, from garnishment. For example, Social Security is largely (though not entirely) exempt from garnishment: under federal law, it can be garnished only for certain debts to the federal government (like income taxes), child support, and alimony.
Besides the federal exemption for Social Security, states have the right to establish additional exemptions to or protection from garnishment. Indiana, however, has largely declined to exercise that right; the state leaves more non-wage, non-salary types of income potentially open to garnishment than most states. (Note: wages and salary typically enjoy the least protection from garnishment, and are usually fully garnishable subject only to the maximum threshold discussed in the next section.)
- Pensions: Indiana protects state employee retirement benefits, as well as those of firefighters. However, it provides only very limited protection to the retirement benefits of many other public servants, such as police or sheriffs—essentially, while unpaid benefits may not be claimed by creditors, as they are paid, they become something creditors can take. And there is no protection at all for private sector retirement benefits or pensions.
- Some few types of public benefits or assistance are protected, such as: workers’ compensation; unemployment benefits; and crime victim compensation. Notably, it does not appear that aid to families with dependent children or state assistance to the elderly, blind, or disabled is protected.
- Some insurance benefits, such as mutual life or accident insurance proceeds; or life insurance proceeds if either the beneficiaries are the insured’s spouse or dependent children, or the policy specifically, in its terms, says its proceeds may not be diverted to creditors.
Indiana, as can be seen from the above, leaves most forms of income vulnerable to garnishment.
Indiana Maximum Threshold
In addition to not establishing many of its own exemptions from garnishment, Indiana has chosen to simply federal law in terms of the maximum amount of income garnished. Under federal law, the lesser of the following may be garnished:
- The amount by which a debtor’s weekly income exceeds 30 times the minimum wage
This allows the debtor something to live on, since he or she gets to keep the equivalent each week of working 30 hours at minimum wage.
- 25% of disposable income, with disposal income defined as income remaining after paycheck deductions required by law. (Note: other necessary or required deductions, such as for health insurance premiums, are not considered in determining disposable income.) Since there are very few such deductions other than FICA, and these deductions all together typically add up to less than 10% of a person’s income, for anyone making substantially over minimum wage, that usually means that 25% of at least 90% of their income could be garnished.
Note: the 25% threshold is not 25% of income for each garnishment: it is a total of 25% of disposable income subject to garnishment, no matter how many creditors there are.
Indiana Statute of Limitations
Once a creditor has a judgment in its favor, under Indiana law, it has a LONG time to look to garnish the debtor’s wages: 20 years for most judgments, which means a creditor can wait two decades to see if a debtor starts earning more money, before garnishing the debtor’s wages or salary.
First, though, it needs to get the judgment. That means suing within the appropriate time (statute of limitations). The limitations period varies with the type of debt or cause of action. For common consumer debts, the limitation periods are:
- Open accounts (credit cards), oral (or verbal) contracts, and promissory notes and similar instruments: 6 years
- Written contracts: 10 years
Writ of Garnishment in Indiana
Since garnishment comes after a creditor has already won in court, getting a judgment ordering the payment of money on some debt, the debtor should already have had an opportunity to defend him- or herself. As a result, the debtor’s involvement in garnishment is often minimal, and the main parties to the garnishment are the creditor and the garnishee (the party holding debtor’s money).
The creditor applies to the court in writing for garnishment. The basis of the application is the judgment. The creditor needs to state those facts or circumstances which give rise to garnishment: money is due it under a judgment (and has not been paid); garnishment is believed necessary to satisfy the judgment; and the garnishee is believed to have money owed to the debtor which can be used to satisfy the debt. For wage garnishment, the garnishee will be the debtor’s employer, and the money owed is the debtor’s salary or wages.
Unless the debtor has some valid (usually procedural, or based in income exemptions) ground for challenging the garnishment, the process of garnishment primarily involves verifying that the garnishee has money due to the debtor, then ordering that some portion of the money instead be turned over to the creditor to satisfy the judgment. More on Stopping Wage Garnishment in Indiana.
Getting Legal Help
Garnishments are granted to satisfy judgments based on legally recognized debts. By the time garnishment is in the works, the debtor should no longer be challenging the basic validity of the debt—that should have been done during the litigation in which the creditor obtained the judgment against the debtor. However, there may be other grounds to challenge the garnishment, or at least to reduce its size; for example—
- Have statutes of limitation been complied with?
- Has legal process and procedure been complied with?
- Is the garnishment based on a true and up-to-date set of facts?
- Is debtor’s disposable income being calculated correctly?
This is where a lawyer can help a debtor: in challenging the procedural basis for, and application of, the garnishment.