Friday, December 2, 2011

What is a Garnishment?

In the process of collecting a judgment, it is common to utilize garnishments. Commonly used phrases, such as “garnishing wages” or “garnishing bank accounts”, do not accurately describe the legal procedure. More accurately, a garnishment is defined as a suit by the judgment debtor in the name of the judgment creditor against a third party (garnishee) for the purpose of recovering intangible assets owned by the judgment debtor. Butler v. Butler, 219 Va. 164 (1978). This is obviously a very dense definition that needs to be parsed.

First, a garnishment is a suit by the judgment debtor against the garnishee. Although a judgment creditor will file the garnishment paperwork, the question in a garnishment action is whether the garnishee is holding some asset of the judgment debtor. Just as a person may sue to recover monies owed to them, a garnishment allows a judgment creditor to effectively assume a judgment debtor’s rights to such monies. Accordingly, if the garnishee owes money to the judgment debtor, the judgment creditor can utilize a garnishment to intercept that money.

One important reason to define a garnishment as a suit by the judgment debtor is jurisdiction. The relevant inquiry in a garnishment action is not whether the garnishee owes the judgment debtor property within the jurisdiction, but rather, if the judgment debtor sued in that jurisdiction, could they recover the money owed to them? Phrasing a garnishment as a suit by the judgment debtor thus makes the only relevant jurisdictional issue whether there is jurisdiction over the garnishee and avoids the question of whether there is jurisdiction over the particular property. Therefore, under Virginia law, the question is not whether the judgment creditor can convince the garnishee to admit and allow access to the judgment debtor’s funds. Rather, the question is whether the judgment debtor could obtain a judgment against the garnishee in a Virginia court if it chose to enforce its debt obligations here. See, Harris v. Balk, 198 U.S. 215 (1905); Marcus, Santoro & Kozak, P.C. v. Hung-Lin Wu, 652 S.E.2d 777 (Va. 2007).

The other part of the garnishment definition that requires some level of detail is the concept of intangible assets. Seizure of tangible assets, such as a house, car, etc. requires the use of a different collection proceeding. An asset is intangible if it lacks a physical form. Consider the typical bank account. Most banks do not hold their customer’s money in a large mattress somewhere in a back room. Typically, bank accounts are simply payment obligations that a bank owes to its customers. Thus, a garnishment can attach the payment obligation if not the actual money. Similarly, wages and salary represent a payment obligation from employer to employee. There is no physical asset. Accordingly, a wage garnishment can reach the payment obligation that the employer owes to its employee thereby intercepting the money actually required to be paid on payday. However, there are a wide variety of intangible assets beyond bank accounts and wages. Contract payments, account receivables, stock certificates (in some circumstances), certain types of inheritance rights, trust payments, and mineral rights constitute just a short list of some other types of intangible assets that can be subject to garnishment.

An experienced judgment collection attorney can analyze a judgment debtor’s assets and determine the best approach to seizing those assets in order to satisfy a judgment. If you need assistance in collection your judgment, please contact the attorneys at Gross & Romanick.