Alabama Collection Laws

What rights do creditors have under Alabama law to collect debts from consumers?

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Bill's Answer: Bills.com Resident Expert

A collection agent or law firm that owns a collection account is a creditor. A creditor has several legal means of collecting a debt. But before the creditor can start, the creditor must go to court to receive a judgment. See the Bills.com resource Served Summons and Complaint to learn more about this process.

The court may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor's bank accounts, and a lien on the debtor's property. A creditor that is granted a judgment is called a "judgment-creditor." Which of these tools the creditor will use depends on the circumstances. We discuss each of these remedies below.

Wage garnishment

The most common method used by judgment-creditors to enforce judgments is wage garnishment, in which a judgment creditor would contact the debtor's employer and require the employer to deduct a certain portion of the debtor's wages each pay period and send the money to the creditor. However, several states, including Texas, Pennsylvania, North Carolina, and South Carolina, do not allow wage garnishment for the enforcement of most judgments. In several other states, such as New Hampshire, wage garnishment is not the "preferred" method of judgment enforcement because, although possible, it is a tedious and time consuming process for creditors.

In most states, creditors are allowed to garnish between 10% and 25% of your wages, with the percentage allowed being determined by each state.

Alabama garnishment rules are found in Title 35 Chapter 11 Article 5. In general, Alabma follows the federal rules for the amount of a garnishment, which allows up to 25% of a worker's wages to be garnished. See the Dept. of Labor's Employment Law Guide - Wage Garnishment and the Dept. of the Treasury's Answers About Garnishments. Municipal and state employees may be garnished.

Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law. Garnishment of Social Security and pensions may be allowed for child support.

Generally speaking, 401k or other retirement funds are exempt from garnishment. It is advisable to have those funds specifically deposited into a separate bank account to ensure financial accounting if you are concerned with a garnishment on those payments. However, there appears to be no provision for life insurance.

If you reside in another state, see Advice on Judgment Garnishment to learn more about wage garnishment.

Levy bank accounts

A levy means that the creditor has the right to take whatever money in a debtor's account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state's laws to find if a bank account can be levied. In some states levy is called attachment or account garnishment. The names may vary but the concept is the same.

In Alabama, administrative levy is allowed under for recovery of taxes and unpaid child support. In Alabama, levy of bank accounts is called garnishment. AlabamaLegalHelp.org offers online court forms a consumer can complete to request to stop a garnishment of a bank account.

Lien

A lien is an encumbrance -- a claim -- on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinance the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.

Alabama laws governing liens are Title 35, Chapter 11. Under Section 6-9-211, "Every judgment, a certificate of which has been filed as provided in Section 6-9-210, shall be a lien in the county where filed on all property of the defendant which is subject to levy and sale under execution, and such lien shall continue for 10 years after the date of such judgment..." Mechanics and contractors (and similar laborers and professionals) have the right to place a lien on a property.

Alabama statutes of limitations

Each state has is own statute of limitations on judgments. Statute of Limitations for Alabama is Title 6, Chapter 2. The statute of limits for open accounts (credit cards) is three years (Section 6-2-37), written contracts are six or 10 years depending on the circumstances (Section 6-2-33 and 6-2-34), and spoken contracts are six years.

Alabama foreclosure

See the Bills.com resource Alabama foreclosure to learn more about the rules surrounding foreclosure in this state.

Recommendation

Consult with an Alabama attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Alabama.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (42)


T H.
Scottsboro, AL  |  May 21, 2012
My question is for my fiance. He lives in Alabama and owes medical bills in excess of $70,000. He pays $10 to $50 on every bill each bill. He recently received a collection letter from the hospital, total due $50,000, reduced settlement offer is $42,000. They want the money with in a month. This is from 2009. He has been paying on this each month. He was also recently hospitalized at the same hospital and has just received another bill for $16,000. There is no way he can pay this. He has other outstanding bills he is paying on to individual doctors as well. What is the best way to handle this? I know he can not pay this, even paying on this every month it will never be paid off. HELP??? Would bankruptcy be the best option? Is there limitation of the number of years for collection of these medical bills?
Bills.com
May 21, 2012
Medical debts are subject to the statute of limitations, but the fact that he has been paying on these debts means that the SOL has not strarted to run.

Given the large size of his debts, I think that speaking with a bankruptcy attorney is a good choice. If he qualifies for Chapter 7 BK, he can file and discharge his debts or use that fact as leverage to negotiate settlements at a far lower cost than the settlement he was offered.
Kelly L.
Madison, AL  |  May 19, 2012
I performed medical services. I billed for services performed. Insurance paid in full with a check written out to patient and her attorney. The "been in a wreck, need a check" attorney has the insurance payment held in a "trust account because this money is the patient's because she paid her premium and because just in case she does not get enough money she may want to pay you only a fraction"...so the attorney states. The attorney is not communicating with me. How can I get paid without waiting on the case to settle and without waiting to see if it is enough money for her? The amount is just over $2400, which is within small claims allowance. How can I collect from her?
Bills.com
May 21, 2012
I believe you answered your own question: File a small claims action against your now-former patient. Consult with a lawyer at each stage in this process to make certain you complete the small claims filing process properly. Be sure to respond to all reasonable requests for production of evidence in a timely manner, too. Customarily, the tables are tilted in the favor of plaintiffs in small claims action because the defendants are not represented by counsel. Your situation is the opposite, and working with a lawyer will help level the playing field for both parties.
David P.
Dayton, OH  |  May 01, 2012
My question is, my father passed away in August of 2010. How long can creditors go after his estate, if it has not been probated yet? Since my father was married at the time, but separated from his wife, and most of the overdue credit is in her name. Or does the clock start once it goes to probate, and placed a notice in the local paper.
Bills.com
May 02, 2012
Consult with a probate lawyer in your state to learn the answer to your question. Answers to these types of questions are state-specific, and the particular circumstances in each case matter.
Richard H.
Theodore, AL  |  April 18, 2012
I own a bar in alabama, How do you collect on someone who has left their debit card for a tab walked out and called and cancelled their card, and went to run it and it is declined. Thanks, Rick
Bills.com
April 18, 2012
It seems to me that your options are:
  1. Take the person to small claims court.
  2. Consult with an attorney about the laws in Alabama regarding "defrauding an innkeeper."
Christine W.
Wanaque, NJ  |  March 22, 2012
I received a judgment of $93,000 for the child support arrears owed to me by my son's father. He is a resident of Alabama, married and the marital home is in his wife's name only. With Alabama being a community property state, am I able to place a lien on the martial residence for a Child Support Arrears of $93K?
Bills.com
March 22, 2012
Alabama is not one of the community property states.

Consult with a lawyer in Alabama to learn what remedies you may have available. If you can show a court the father is hiding assets in his spouse's name, you may be able to pursue those assets. I hope you find success.
Logan C.
Pell City, AL  |  January 20, 2012
I was living with my roommate and she thinks she can get my SSI check taken from me so she can get it. She is saying I broke a window (which i did not) and she wants me to pay for it but she left me with some bills. Can she get my SSI check? I live in St. Clair County, Alabama.
Bills.com
January 21, 2012
It is my understanding that Social Security benefits are now direct-deposited into beneficiaries bank or credit union accounts. Of course, I may be misinformed. If a person takes money from another's bank or credit union account, they violate state and federal law. If a person seizes another's Social Security benefit payment without a court order, they violate federal law. You asked if someone can take your benefit. The answer is yes, of course. Can someone take your Social Security benefit legally? No.

See the Bills.com resource Social Security Garnishment to learn more.
James E.
Birmingham, AL  |  October 16, 2011
My wages are being garnished because of my dads debt and I wanted to know how can I stop the garnishment.
Bills.com
October 17, 2011
Consult with a lawyer in your area who has consumer law or civil litigation experience to learn how to vacate the judgment and recover the funds unjustly taken from you. If you cannot afford a lawyer, call your county bar association and ask for the names of the organizations in your area that provide no-cost legal services to people with low or no income. Make an appointment with that organization, and bring all of the documents you have regarding the debt to your meeting. The lawyer you meet will advise you accordingly.
Cham V.
College Park, GA  |  October 02, 2011
I signed a private student loan with my co-signer in 2005 when I was 18. The loan check was issued to both parties, however the co-signer forged my signature and deposited the check into their personal checking account without my knowledge. I was not given access to that account therefore I did not have access to the student funds. I was told by the cosigner that the check did not come, so I assumed I was denied. After graduating in 2008 I received correspondence from the loan stating that I would need to repay the debt and that the debt was already past due. I have since disputed this debt since I did not have access to the funds, including filing a forgery police report. However, the company states that statue of limitations has expired. The bank that deposited the forged document will not take responsibility. I paid on the loan to keep my credit in good standing while in dispute, however after denied the help I needed I refused to pay. The loan has since gone to collections where I am being harassed for payment with threats of wage garnishment. Their argument is that I signed the MPN but not the check therefore I am responsible for the debt. What can I do to the cosigner to resolve this issue? What can I do to the collection agency and to the private loan lenders?
Bills.com
October 02, 2011
Consult with a lawyer who has consumer law or civil litigation experience. He or she will analyze the documents you have, and will discuss your options. You may need to file a lawsuit against the other party and either the bank that cashed the check or the lender that issued the check as well. Remember that the bank in question is not your lawyer. I am not suggesting the banker you spoke to lied about your state's statute of limitations, but do you really expect a person in that position to give you a complete answer? Hire an advocate, a lawyer, to explain your option and represent you in your negotiations and possible litigation.
Mo R.
Northport, AL  |  September 12, 2011
I have a judgment against me. The credit card company sued me and was given a judgment by default. I think it was around 2002. In 2011 a totally different collection company is trying to collect the judgment, and they are threatening to sue me. My original debt was about 700, was sued for 1500 or 2500, now this new collection company wants to sue me for 5000. Can they do it? I would not mind to pay the original creditor through monthly payment( since my situation has gotten better) but I do not want to pay a dime to this junk debt buyer, what are my options?
Bills.com
September 13, 2011
Validate the debt. If the collection agent cannot validate the debt, it may not attempt to collect it or report it to the consumer credit reporting agencies.
Mike A.
Montrose, AL  |  September 12, 2011
what is the minimum amount you can pay on a credit card to prevent them from pursuing judgments against you? ie: if you pay them something $10-$15 month and not your minimum payment are they able to take action in the state of alabama?
Bills.com
September 13, 2011
The bit of common non-law you mentioned seems particularly strong in Alabama. Please see the Bills.com resource If I Pay a Small Amount on My Debt, Can I Be Sued? to learn why this urban myth is strong in Alabama, and what your options are for resolving your debt.
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