How to Protect Yourself from Holiday-Season Debt Garnishments

Written by Zac Oswald
Legal Aid Society

 

Nashville, TN – If you spend time in Davidson County General Sessions Court, a pattern becomes obvious very quickly: Many of the cases involve people who are struggling with consumer debt.

 

Debt from flex loans, payday loans, credit cards, medical bills, rent and other large expenses can very quickly become overwhelming, especially after a job loss, medical issue or unexpected emergency. Many people don’t even realize how serious the problem is until they’re sued, they find money missing from their bank accounts, or their paycheck is reduced because of a wage garnishment.

 

With budgets tighter than ever during and after the holiday season, losing access to wages or savings can be a devastating shock. The good news is that Tennessee law provides simple, powerful tools to protect your income and bank accounts — tools that most people don’t know exist.

 

Most consumer debt follows a predictable path.

 

First, you owe a debt. If payments fall behind, the account becomes delinquent. After a period of nonpayment, the original creditor may “charge off” the debt. A charge-off does not mean the debt is forgiven or erased — it is an accounting decision by the creditor.

 

After charge-off, several things may happen. The creditor may continue trying to collect, assign the account to a collection agency or sell the debt to a debt buyer. In most cases, you won’t even know that your debt was sold to another company.

 

If the company can’t get money from you during collections, the creditor or debt buyer may file a lawsuit in General Sessions Court. This is the stage where ignoring the problem causes the most harm.

 

If you are sued, the most important thing you can do is to show up to court. When a borrower is a no-show, the creditor automatically wins. From there, the company can start collecting the debt in many different ways — including garnishing wages or seizing money from a bank account.

 

Showing up to court can make a real difference. Judges may encourage negotiation between the parties or even reschedule the hearing to a later date. At the very least, showing up prevents an automatic judgment and keeps options open.

 

Once a judgment is entered, collectors move quickly to collect. Collectors may send garnishment orders to multiple financial institutions at once, hoping to locate an account with available funds. A person who wakes up to find that their bank account was drained can find themselves in a sudden panic.

 

Even after a judgment, borrowers are not out of options. Tennessee law provides at least two important tools that can protect money and income.

 

Tennessee law allows you to protect up to $10,000 of personal property, including money in your bank accounts, by filing an Affidavit of Claim Exemptions. You can even protect funds held in mobile-banking apps such as Chime, Cash App, PayPal or Venmo. Filing an affidavit of claim exemptions is quick and cheaper (usually $25) than losing the money in your bank account. A filed exemption can significantly reduce the risk of bank garnishments. Often, if collectors see an exemption on a case file, they stop trying to garnish bank accounts and move on to another method of collection.

 

A Motion for Installment Payments, usually called a “slow pay,” can prevent wage garnishments. A slow play lets you pay the judgment in affordable installments — weekly, biweekly, monthly or another regular schedule. To request installment payments, you must provide basic financial information, including income, expenses, debts and dependents. After the court approves the payment plan, your wages or bank account won’t be garnished as long as you make the scheduled payments.

 

Both of these forms can be filed without a lawyer.

 

Garnishments that hit right before the holidays can wipe out savings that families have been trying to protect all year. At Legal Aid Society, we work every day with low-income clients to help protect their money. Both the Affidavit of Claim Exemptions and “slow pay” form are straightforward to prepare and can immediately protect a person’s financial stability.

 

If you have a judgment against you or have been sued by a debt collector, we may be able to help. Taking action now can help protect your money and bring some peace of mind during the holiday season.