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.
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. Under Ohio law, 3121.03, in no case shall the sum of the amount to be withheld and any fee withheld by the payor as a charge for its services exceed the maximum amount permitted under section 303(b) of the "Consumer Credit Protection Act," 1673.
In Ohio, wage garnishment is allowed under 2716.07. If the judgment-creditor is aware of the debtor's place of employment, it may seek wage garnishment.
Under federal law, the garnishment applies to 25% of the debtor's net take home pay, (i.e., gross pay less statutorily mandated deductions). Garnishment can occur only after the person being garnished has received a 10-day's notice.
However, under Ohio law, you also may contact a budget and debt counseling service described in division (D) of section 2716.03 of the Revised Code for the purpose of entering into an agreement for debt scheduling. There may not be enough time to set up an agreement for debt scheduling in order to avoid a garnishment of your wages based upon this demand for payment, but entering into an agreement for debt scheduling might protect you from future garnishments of your wages. Under an agreement for debt scheduling, you will have to regularly pay a portion of your income to the service until the debts subject to the agreement are paid off. This portion of your income will be paid by the service to your creditors who are owed debts subject to the agreement. This can be to your advantage because these creditors cannot garnish your wages while you make your payments to the service on time.
If you reside in another state, see the Bills.com Wage Garnishment article to learn more.
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 Ohio, levy is allowed under 1304.80. As used in this section, "creditor process" means levy, attachment, garnishment, notice of lien, sequestration, or similar process issued by or on behalf of a creditor or other claimant with respect to an account.
This 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 regarding the creditor 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.
If you reside in another state, see the Bills.com Account Levy resource to learn more about the general rules for this remedy.
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 Ohio law, property liens are an allowable method available to a creditor for payment of debtor obligations. Please see section 118.20, Authorizing Debt Obligations, for a discussion on property liens. See also the reader comments below for a discussion on liens and foreclosure.
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Statute of Limitations
Each state has its own statute of limitations. Ohio has the most creditor-friendly statutes of limitations in the country. According to Ohio 2305.07 Contract not in writing, and 2305.06 Contract in writing, the statue of limitations for an oral contract is six years, a written contract is 15 years.
When it comes to credit card accounts, some courts apply Ohio's "open account" statute of limitations, which is 6 years (Ohio R.C. 2305.07). Other Ohio courts use the written contracts rule, which is 15 years for actions accruing before Sept. 28, 2012, and 8 years for actions accruing after Sept 28, 2012 (2305.06 as per SB 224). Others use Ohio's Retail Installment Sales Act, which sets the limit at 4 years (1302.98 and 1317.01). This means that when a local court chooses a credit card statute of limitations, instead of relying on binding precedent from higher level courts (called stare decisis in the legal field), judges seem to apply the rule argued most persuasively by the two parties.
A judgment from an Ohio court is valid for 5 years, and then becomes dormant unless revived by the judgment-creditor (2329.07)
The statute of limitations for recovering a deficiency balance relating to a mortgage foreclosure is 2 years, according to Ohio 2329.08.
See the Bills.com resource Collection Laws and the Statute of Limitations for the rules in other states.
Consult with an Ohio attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Ohio.
Ohio foreclosure laws are found in 323.28. To learn more about the rules surrounding foreclosure in this state, including deficiency balances, please see 5721.192. If the proceeds from a sale of a parcel under section 5721.19 or 5723.06 of the Revised Code are insufficient to pay in full the amount of the taxes, assessments, charges, penalties, and interest which are due and unpaid; the costs incurred in the foreclosure proceeding, the foreclosure and forfeiture proceeding, or both foreclosure and forfeiture proceedings which are due and unpaid; and, if division (B)(1) or (2) of section 5721.17 of the Revised Code is applicable, any notes issued by a receiver pursuant to division (F) of section 3767.41 of the Revised Code and any receiver's lien as defined in division (C)(4) of section 5721.18 of the Revised Code, the court may enter a deficiency judgment for the unpaid amount as authorized by sections 5721.17, 5721.19, 5723.05, and 5723.18 of the Revised Code, in accordance with this section.
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