What Assets Are Subject to Seizure in a Civil Judgment?
A Judgment is Not Enough. Merely because a creditor obtains a judgment does not mean that matter is at an end. The party that wins the judgment must then try to collect from assets available to the debtor. Courts usually will not let a creditor take discovery on (or learn about) the assets of the debtor until after a judgment is secured. So the creditor takes a risk that the debtor may not have assets sufficient to satisfy the judgment.
What Assets Can Be Seized to Satisfy the Judgment? In general, a judgment creditor must first go against the individually-owned debts of the judgment debtor. If those assets are insufficient to satisfy the debt, the creditor will then try to go after jointly-owned assets. Technically, the creditor can only go after the debtor's portion of jointly-owned assets, but often the creditor will presume the debtor owns the entire asset (house, car, checking account) and force the non-debtor owner to establish her percentage of ownership. Also, even if some jointly- held property is exempt from seizure, the creditor can cloud title by placing a lien on the asset, which could prevent sale or refinancing. Usually a sheriff will execute a judgment on the property. The only way to prevent seizure is to show the sheriff or the judge that the non-debtor holds the full interest.
What Assets Cannot be Used to Satisfy a Judgment Debt.
Federal. If a creditor other than the federal government tries to garnish a judgment debtor’s Social Security benefits, inform them that such an action violates the law. Specifically, Section 207 of the Social Security Act (42 U.S.C. 407) states:
The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
Section 207 can also be used as a defense if Social Security benefits are incorrectly garnished or seized.
However, note that if Social Security benefits are commingled with other assets, it may be difficult to identify such benefits, thereby exposing them to seizure. The Social Security Administration will only protect benefits against garnishment, assignments and other legal processes until the beneficiary is paid. Once the benefits are in an account, the recipient must apply legal remedies to show that the assets are derived from the Social Security Administration. Therefore, it is a good idea to consider creating a separate account for such benefits. Finally, such benefits are only protected from seizure by parties other than the federal government, and Social Security benefits can still be garnished for child support, alimony, federal taxes, and certain other government debts.
New Jersey. New Jersey exempts several sources of income from garnishment.
· Public pensions: New Jersey exempts from garnishment the pensions of municipal and county employees generally, as well a number of other public servants, including teachers, prison employees, alcohol beverage control officers, and board of health employees. It appears that private retirement benefits are not exempt from garnishment.
· Public benefits or assistance: New Jersey also exempts workers’ compensation, unemployment insurance, crime victim compensation, and aid to the aged and disabled.
· Insurance and annuities: The following may also be exempt: annuity benefits up to $500/month; group health or life benefits; military disability or death benefits; and life insurance proceeds in many cases (particularly if the policy says the proceeds will not be used for creditors).
Even if Assets can be Seized or Garnished, There are Limits.
Federal. Under the Fair Debt Collection Practices Act, a creditor can only garnish up to the lesser of 25% of disposable income or the amount by which the debtor’s income exceeds 30 times the minimum hourly wage per week. In this context, disposable income is generally viewed as income available after payment of withholding, FICA, unemployment contributions, and state employee retirement contributions. Note also, that for certain debts, like tax obligations and child support, courts can exceed the 25% limit and go up to the 50 % or 60% range.
New Jersey. Even if some recovery could be made within the Fair Debt Collection Practices Act limitations, New Jersey law provides additional protections. Under New Jersey law, garnishment is limited to 10% of the debtor’s gross income unless the debtor earns more than 250% of the poverty level.