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Seizure of accounts and property: how debts are collected from borrowers in the USA

After the court has ruled against you, the creditor will be called the "judgment creditor" and you will be the "judgment debtor." Such creditors have many more collection methods available than creditors trying to collect debts before a court ruling. The publication told about the methods of collecting debts after the court decision. Nolo.

Photo: Shutterstock

What property a lender can take varies from state to state. Typically, the lender may demand a portion of your net pay - usually up to 25%, or more if the decision concerns child support - bank and other escrow accounts, and valuable personal property such as cars and antiques.

But creditors cannot take all your money and property. Each state has certain properties that it declares “exempt,” which means it is not available to your creditors, even to court-ordered creditors. You don't have to lose everything just because you owe money. You still need to eat, have a roof over your head, dress and provide for your family.

Here are the most common ways that adjudicated lenders demand debts.

Withholding wages

Lenders usually act through payroll deduction first. Withholding wages is a very effective method for a court-ordered lender if you receive a regular paycheck. Your employer takes a portion of your salary in each pay period and sends that money to your lender; you do not receive this portion of your salary.

Federal law permits a court-ordered lender to take up to 25% of your net income or the amount by which your weekly net earnings exceed 30 times the federal minimum wage, whichever is less. “Net Income” is your income after deducting all statutory deductions such as withholding taxes and unemployment insurance.

Some states offer stricter measures for judgment debtors.

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You will have to pay more for specific debts. Wage linkage laws and restrictions do not apply to:

  • Алименты... Up to 50% of your wages can be used to pay child support, and more if you are not currently supporting another dependent or are delaying payments.
  • Income taxes. If you ignore all attempts by the IRS to collect tax arrears, the government can collect virtually all of your wages. The weekly withholding amount is based on the standard income tax deduction plus the amount of each personal income tax refund you are entitled to, divided by 52 weeks.
How a lender keeps your paycheck

In order to withhold your wages, a court-ordered creditor obtains permission, commonly referred to as a "court order." Under this authorization, the creditor is ordered by the court to order the sheriff to “arrest” a portion of your wages. The sheriff, in turn, notifies your employer of the withholding, and your employer informs you. If you don't mind, your employer sends the withheld amount for each pay period to the sheriff, who deducts the costs and sends the remainder to the lender.

Objection to withholding of wages

You can object to the seizure of wages by requesting a court hearing. In some states, the withholding may not begin until the hearing is over, unless you revoke your decision. However, in most states, if there is an opportunity to immediately consider an objection, the withholding can take effect immediately.

Property pledge

One of the foreclosure methods commonly used by adjudicated lenders is property pledging. In about half of the states, a judgment against you automatically creates a lien on real estate that you own in the county where the judgment was issued.

In the rest of the states, the lender must register the judgment with the county, and then the recorded judgment creates a lien on your property. In some states, collateral is on your real estate and personal property. The term of the security right is several years. Sometimes lenders can renew the lien.

If a judgment creditor does not receive a lien on personal property after the judgment has been issued, then he may obtain a lien on your personal property. Typically, this type of property lien is recorded in title deeds such as a car or company assets. If, for example, you try to sell your car, you will have to pay off the debt before the sale.

When you sell or refinance your property, the title must be cleared, meaning all liens must be removed before the deal can be closed.

Arrest of property

Instead of waiting for you to sell your property, the lender can “post” the collateral. This means the sheriff will seize your property - usually your home - and arrange for a public sale, the proceeds from which are paid to the lender. However, if your property is tax exempt, the lender will not be able to do this.

Even if your property is not tax exempt, many lenders are reluctant to waste the money and hassle associated with a public sale, especially if the lender doesn't get a lot of money from the sale.

Example. Maddie lives in Wisconsin and owns a $ 300 home. The Children's Clinic received a $ 000 court order against Maddie for urgent treatment of her daughter and, as a result, received a lien on Maddie's home. The clinic is considering the possibility of confiscating the house in order to sell it and get money, but realizes that it will not receive the money, because:

  • Maddie owes $ 225 in mortgage.
  • Maddy must $ 23 in home equity loan.
  • Maddie owes the IRS $ 17.
  • Maddie's house tax exemption is $ 40.
  • This is all for a total of $ 305 more than the value of Maddie's house.
Make sure the lender followed the rules when registering the collateral

The lender who lays court liens on your property must do so in accordance with your state's rules on liens. It is not uncommon for lenders to make mistakes that can render the collateral unenforceable. You may have protection against the lender's attempt to secure the collateral because the collateral is too old or because it was not properly posted. You will need to consult with an experienced consumer lawyer if you suspect that the seizure was improperly or too long ago.

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Seizure of property

A court-ordered creditor can obtain a "writ of execution" from the court and take over your personal property, instructing the sheriff to arrest it. This basically means that the officer takes the property - for example, your collection of baseball cards - or instructs the owner of the property - for example, your bank - to hand it over to the officer.

After the seizure of your property, the sheriff sells it at a public auction and credits the proceeds to your debt. In the case of a bank account, the amount withdrawn from your account applies to your debt.

Assignment orders

An Assignment Order allows lenders to pursue property you own that cannot be taxed, such as expected tax refunds, outstanding life insurance loans.

Contempt of court

Sometimes a court order will include a schedule of installments or recurring payments. In some states, if the judgment does not include such a schedule, the creditor can go back to court and ask the judge to issue an order requiring periodic payments of the debt.

If you violate a court order, the creditor may request a contempt of court order against you. In some states, if a judge issues an order requiring periodic payments of a debt and you miss any payments, the judge may convict you. You can be fined, sentenced to community service, or, at least in theory, a judge can issue a warrant for your arrest and you can go to jail.

Arresting the debtor on the basis of such a warrant is usually not a priority for law enforcement. In most cases, warrants get old and moldy and no one is arrested. But the threat of arrest and imprisonment can be a major incentive for many court-ordered debtors to send payment as soon as possible.

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