Expert: Regan Shinski - 3/17/2010

Question
I have several delinquent accounts totaling in the thousands. I live in a state that doesn't allow wage garnishment with the exception of child support, alimony, and the government. If and when they sue me, how will they get their money (especially if my finances don't allow it)? Thank you.

Answer
Hi Miguel:

Well, it really depends on those state laws you mentioned.  Even though your state may not allow wage garnishment, they may allow attacking bank accounts.  This means they can freeze a bank account and basically take whatever is in there.  

They may also be able to use law enforcement to confiscate personal property.  This basically means a sheriff show up at your house and tags or collects anything of value (cars, tv's, dvds, etc.)  They then hold it for a waiting period where you can dispute ownership or exemption status.  If you don't prove that it is not yours or that it is exempt property under state law, they will sell the property at auction to pay the judgement.

Also, if you own or ever buy real estate, they can place a lien on the property.  If you ever go to sell the property, that amount will be subtracted from the proceeds.

A judgement also stays on your credit report, sometimes indefinitely depending on the state.  This means you will never be able to get prime credit and may not even be able to the credit you want.  You may have to pay much higher interst on a car loan because this judgement is in place to ruin your credit.  A simple example is on a $15,000 car loan for five years.  With good credit you may get 7.9% interest and with the judgement you MAY be able to get as good as 19.9%.  That means over the five year loan you would pay almost $5,600 MORE in interest!  It's the same thing on credit cards and housing.  Your additional interest will likely cost you more than the debts themselves and will go on and on and on until the judgement is removed from your report.

Good luck, I hope this helps,
Regan