Trying to collect the money owed by a debtor isn’t always easy. There are laws limiting certain types of collection activity, and businesses have to be careful to conform to those restrictions.
People and even businesses may default on their financial obligations. Their failure to pay what they should may create major financial pressure for their creditors. There are multiple legal options available for frustrated creditors seeking repayments from unwilling debtors.
Going to court to pursue garnishment can be particularly effective. There are multiple types of garnishments available, including the three popular options briefly explained below.
1. Wage garnishment
Individuals who owe money to a business may have a regular stream of income but may refuse to prioritize creditor repayment. In such cases, the courts may authorize wage garnishment, provided that the debtor earns sufficient money. The creditor can intercept a portion of the debtor’s paycheck until they recoup the full amount of the debt.
2. Bank account garnishment
It is often possible to ask the courts to issue a bank account garnishment. Seeking garnishment generally leads to the courts putting a hold on at least twice the amount of the debt and possibly preventing people from emptying their safety deposit boxes as well.
3. Garnishment of other income
Creditors can potentially garnish any future form of income. Accounts receivable, lawsuit settlements and even insurance payouts could sometimes be subject to garnishment by creditors. Both current assets and future income could be subject to garnishment in certain cases.
Discussing the possibility of wage or bank account garnishment can help creditors speed up the repayment process when debtors don’t prioritize fulfilling their responsibilities. The courts can help creditors force debtors into financial compliance.