Massachusetts Collection Laws

READER QUESTION

Will Massachusetts law protect my property and income if the creditor wins a judgment against me?

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Bills.com Resident Expert
Jan 25, 2012
HIGHLIGHTS
  • The Massachusetts statute of limitations on most debt is 6 years.
  • Massachusetts permits wage garnishment.
  • Bank accounts are not exempt from attachment by judgment creditors.
BILL'S ANSWER

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.

Massachusetts 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.

Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law. Garnishment may be allowed for child support. Massachusetts law provides that child-support and spousal-support payments may be obtained from obligor through an income-withholding order, as stated in Massachusetts law, Chapter 119A: Section 12. Child/Spousal Support orders for income-withholding from another state are also enforceable, as stated in Massachusetts law, Chapter 209D: Section 5-501.

In Massachusetts, wage garnishment (income-withholding) is NOT ALLOWED under Chapter 246: Section 20A if the order comes from an out-of-state court. Like other states, Massachusetts requires a judgment be domesticated before it is enforced by a local court.

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. Some states call levy attachment or garnishment.

In Massachusetts, a bank account levy is allowed under Chapter 106: Section 4A-502. This subsection applies to creditor process with respect to an authorized account of the sender of a payment order if the creditor process is served on the receiving bank. For the purpose of determining rights with respect to the credit process, if the receiving bank accepts the payment order the balance in the authorized account is deemed to be reduced by the amount of the payment order to the extent the bank did not otherwise receive payment of the order, unless the creditor process is served at a time and in a manner affording the bank a reasonable opportunity to act on it before the bank accepts the payment order.

Massachusetts 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 refinances 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.

Under Massachusetts law, Chapter 223: Section 42, all real and personal property liable to be taken on execution, except such personal property as, from its nature or situation, has been considered as exempt according to the principles of the common law as adopted and practiced in the commonwealth, or which is specifically exempt from execution under Chapter 235: Section 34, and except as provided in the four following sections, may be attached upon a writ of attachment in any action in which the debt or damages are recoverable, and may be held as security to satisfy such judgment as the plaintiff may recover; but no attachment of land shall be made on a writ returnable before a district court unless the debt or damages demanded therein exceed $20.

Massachusetts Statute of limitations

Each state has its own statute of limitations. According to Massachusetts Chapter 260: Section 2. Contract actions; actions upon judgments or decrees of courts of record, the statute of limitations for debt related to a contract in Massachusetts is six years.

Massachusetts Chapter 260: Section 20 concerns the Massachusetts statute of limitations on judgments. Under Massachusetts law, a judgment is presumed satisfied after 20 years. The statutory maximum interest rate on an unpaid judgment is 12%.

Massachusetts Foreclosure

Massachusetts foreclosure laws are found in CHAPTER 244. FORECLOSURE AND REDEMPTION OF MORTGAGES. To learn more about the rules surrounding deficiency balances, please see Chapter 255: Section 13J. Deficiency balances are recoverable by a creditor:

(1) If the unpaid balance of the consumer credit transaction at the time of default was two thousand dollars or more the creditor shall be entitled to recover from the debtor the deficiency, if any, resulting from deducting the fair market value of the collateral from the unpaid balance due and shall also be entitled to any reasonable repossession and storage costs, provided he has complied with all provisions of this section.

(2) In a proceeding for a deficiency the fair market value of the collateral shall be a question for the court to determine. Periodically published trade estimates of the retail value of goods shall, to the extent they are recognized in the particular trade or business, be presumed to be the fair market value of the collateral.

Recommendation

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

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

Best,

Bill

Bills.com

Comments (10)


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Darren J.
Boston, MA  |  January 25, 2012
My mother is looking to get a line of credit on her fully paid off home. I she for some reason can't pay the loan can the bank foreclose on her home?
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Bills.com
January 26, 2012
If you mother pledges her home as security and defaults, then the lender will have the option of foreclosing on the property. In general, secured loans, such as mortgage loans, are cheaper than unsecured loans.
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Samantha P.
Brockton, MA  |  October 28, 2011
i am a student and i have racked up about 8,000 in student loans so far the loan comes from my school...so my question is if i dont pay these loans back when its time can my wages be garnished?
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Bills.com
October 28, 2011
If the student loans are federal, then the Dept. of Education can garnish your wages administratively. If the student loans are private, then the lender must use your state's court system and laws to collect the debt. To the extent that wage garnishment is allowed in your state for judgments, the lender can use that remedy and others.
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Tina S.
Randolph, MA  |  October 03, 2011
If I have worked out a payment plan with a debtor (Collection Agency) prior to our scheduled court date, can they still place a lien on my hous since no "judgment" has been declared but more a satisfactory payment plan? Thank you.
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Bills.com
October 03, 2011
If a debtor (a consumer in this context) reaches an out-of-court settlement with a creditor (a credit card issuer, medical provider, mortgagee, collection agent, or other lender), a stipulation in that settlement is the creditor must ask the court to dismiss the case.

You mentioned a payment plan. Review your contract for the payment plan. Does the creditor promise to dismiss the pending lawsuit against you?
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Carol L.
Phillipston, MA  |  August 26, 2011
There is a judgement against me,from a credit card collector.That I went to court for. I own a home that I live in. it has a homestead act filed on it. I am on SSDI, and an elder. I got a call from a lawyer of the plaintiff, that a lien is being placed on my home. What can I do?
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Bills.com
August 26, 2011
A lien will only harm you if you try to sell or refinance the home. There is not much you can do to stop it being filed, unless you pay the debt. Were you to file bankruptcy, you can exempt up to $300,000 in home equity in MA. Therefore, if your home is worth less than that you could choose to kill the debt and the lien via bankruptcy. One reason to consider that is if you want to sell the home before the lien would expire or if you were concerned about the lien affecting an inheritance you wish to leave behind, as the lien would be satisfied from your estate.
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Dave D.
Atlanta, GA  |  May 27, 2011
I live in another state (GA), but I work for a company in Massachusetts can my wages be garnished by a credit card company? What would they have to do?
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Bills.com
May 31, 2011
For you to have your wages garnished, your creditor would need to obtain a judgment against you. The creditor can sue you in your state of residence. Or, it may sue you in another state, and domesticate its judgment in your state of residence. The headquarters or location of your employer's payroll office is irrelevant.
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