Thank you for your question about what can happen to you when you stop making payments on a debt while living in Pennsylvania.
Judgment Before Garnishment
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 against the debtor that affects 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. To garnish wages, a judgment creditor contacts the debtor's employer, supplying proof of the judgment. This requires 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 Pennsylvania, Texas, 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.
Under Pennsylvania law, arrearages in child support payments may result in attachment on wages as set forth in Section 4348 - Title 23 - DOMESTIC RELATIONS, regulated by the Consumer Credit Protection Act. Arrearages in child support payments may also be recovered from lottery winnings as set forth in Section 4308 - Title 23 - DOMESTIC RELATIONS. 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.
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 Pennsylvania, a bank account levy is allowed under Section 9607 - Title 13 - COMMERCIAL CODE Code, but only after judgment is awarded.
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, against a debtor that affects the debtor's 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, after satisfying any liens that are in line ahead of one associated with the debt, such as any mortgages on the property. 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 Pennsylvania law, Section 5107 - Title 12 - COMMERCE AND TRADE, "If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court so orders, subject to the limitations of sections 5108 and 5109, may levy execution on the asset transferred or its proceeds. Notwithstanding voidability of a transfer or an obligation under this chapter, a good faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to: (1) a lien on or a right to retain any interest in the asset transferred.
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 on judgments. Under Pennsylvania law, the following statute of limitations apply:
- Credit card debt 42 Pa. Cons. Stat. § 5525 — 4 years.
- Contract for Sale Section 2725 - Title 13 - COMMERCIAL CODE — 4 years
- Default under a Lease Contract Section 2A506 - Title 13 - COMMERCIAL CODE — 4 years
Section 3118 - Title 13 - COMMERCIAL CODE:
- Note payable at definite time — 6 years
- Note payable on demand — 6 years
- Unaccepted draft — 3 years
- Certified check, teller's check, cashier's check and traveler's check — 3 years
- Certificate of deposit — 6 years
- Accepted draft — 6 years
- Conversion, breach of warranty and other Division 3 actions — 3 years
- Bank Deposits and Collections Section 4111 - Title 13 - COMMERCIAL CODE — 3 years
- Pennsylvania judgment — 5 years, with writ of revival within 5 years
- Non-Pennsylvania judgment — 4 years
Pennsylvania foreclosure laws can be found in conjunction with the various types of real property such as Planned Communities, Condominiums, and Coops. To learn more about the rules surrounding foreclosure in this state, including deficiency balances please refer to Title 68 - Real and Personal Property. Pennsylvania has a deficiency judgment rule as described in Section 8103 - Title 42 - JUDICIARY AND JUDICIAL PROCEDURE. A lender can sue for deficiency within six months after the foreclosure.
Consult with a Pennsylvania state attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Pennsylvania. If you cannot afford an attorney, you can navigate the process yourself by taking advantage of the Pennsylvania court's self-help resources -- for example, you can find general information in the Faq section, while many of the forms you will need are available for download at the Pennsylvania Unified Judicial System forms page. Again, you should find an attorney if possible, but if you cannot, the resources I have listed should prove helpful.
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