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APR 24, 2012

Pennsylvania Collection Laws

What are my rights and liabilities for debt collection in Pennsylvania?

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Bill's Answer: Bills.com Resident Expert

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.

Wage Garnishment

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.

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

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 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 Pennsylvania, a bank account levy is allowed under Section 9607 - Title 13 - COMMERCIAL CODE Code, but only after judgment is awarded.

Lien

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.

Statute of Limitations

Each state has its own statute of limitations on judgments. Under Pennsylvania law, the following statute of limitations apply:

Foreclosure

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.

Recommendation

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 PDF You and Pennsylvania's Judiciary, 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.

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

Best,

Bill

Bills.com

Comments (43)


Rachel Z.
April 23, 2012
I currently live in PA. I owe Sallie Mae almost $50,000 in student loan debt. I used all my forbearance time and cannot afford the monthly payments. I have two sons to take care of. I do work and am barely able to make enough to take care of my household. Are they able to garnish my wages or touch my one of my son's SSi benefit? And if I move to another state does this change?
Bills.com
April 23, 2012
In the past, Sallie Mae offered both private and federal student loans. Go to the Sallie Mae Web site, or review your Sallie may loan documents and monthly statements to learn if your loans are private, federal, or both.

For your private loans, read the Bills.com articles Sallie Mae Forbearance & Deferment and Private Student Loan Default to learn about your options.

For your federal loans, read the Bills.com article Default on Federal Student Loan to learn your options.

You mentioned your son's Social Security benefit. This is not available to the Dept. of Education for two reasons. First, unless your son was the borrower or co-signer, your son does not have liability for your student loan debt. Second, assuming he did have liability, it is unlikely the Dept. of Education could reach this benefit. See the Bills.com resource, Social Security Benefit Garnishment. The no-garnishment-of-Social-Security rule is federal and applies to all states.
Dave O.
T/o Stroud, PA  |  March 28, 2012
My Father in law has a judgment against him in the state of PA. The creditor has issues a form for interrogatories. Does the creditor have the "right" for all his financial information? I have done some reading and I think the sheriff has to order this, but I am not sure.
Bills.com
March 28, 2012
Impossible for us to answer without seeing the documents you received. In most instances, a defendant is compelled to answer interrogatories. In this case, your "interrogatories" may be tarted-up questions wrapped in legal veneer you may have no obligation to answer. Take the documents to a lawyer who has consumer law experience in your state. He or she will tell you in an instant if you must answer the questions, and what the consequences are if you do not.
K.B. L.
Harrisburg, PA  |  March 14, 2012
In 2003 my husband purchased a 4-wheel. It was financed and for the 1st year and a half in error he only carried liability insurance. The bank that we financed through sent us a letter at one point requesting insurance info. We unfortunatly ignored it not realizing our error in insurance coverage..we thought they would have that info. We eventually corrected the insurance coverage due to the insurance company noticing that it was a financed vehicle. We listed the bank as the holder of the title for the 4-wheel. We paid the 4-wheeler off in 2008 but then received a letter from the bank stating we owed them over $5000 more due to forced insurance premiums. These premiums were over $1000 for each year of the loan. Our premium for full coverage was about $80 a year through Progressive. We provided proof of insurance and they refused to reduce amount. They receieved a judgment against my husband in April of 2008. In court my husband came to an agreement with the lady from the bank. They would reduce the amount due to full payment for the year and a half we only carried liability, and a reduced amount of just the difference between full and liability for the other years...and we would not have to pay interest on this amount since it was an insurance premium. He did not sign anything and was told he would receieve something from the bank regarding payment arrangement. We never receieved anything. I guess we should have contacted them but it was a bitter pill to swallow to have to pay this to begin with especially since the premiums were so exorbinate compared to the full coverage premium we paid. Flash forward 4 years and we just recieved a Writ of Revival of the origianl judgement. I have gotten rid of all the paperwork I compiled for this and want to know if I am allowed to request from this bank again all documents of our loan, payments, forced insurance premiums etc. Should we try to have them vacate the debt since there is nothing in writing of the agreement we came to? The paperwork they sent just says to contact them in writing within 20 days to dispute the debt...there is no court dates or anything like that. Do we send something to the law firm or the bank? Lawyer or just suck it up and pay :(???
Bills.com
March 14, 2012
Readers, I welcome your constructive ideas to help KB resolve this issue.
Jamie K.
Lower Macungie Tw, PA  |  March 13, 2012
I am being sued for an unsecured credit card debt that is 3.5 years old. I am scheduled to go to court in 2 weeks and am going to attend & defend myself. If the collection attorney does win will they be able to freeze a bank account that is in both my husband's & my name? The only asset I have is a car. Can they seize that to satisfy the judgment?
Bills.com
March 13, 2012
Joint accounts are subject to account levy. The fact that another person's name also appears on an account does not make it immune to levy — if the judgment-debtor's name and tax ID number are on the account it is open to levy. Regarding your question about the vehicle, what you are referring to is called replevin. That is not a remedy available to judgment-creditors for credit card debt, and is reserved for unusual circumstances. The judgment-creditor may be able to place a lien on the vehicle depending on its value.
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Dave O.
T/o Stroud, PA  |  April 24, 2012
The first question I have is what State you live in? The second thing I would find out is the Statute of limitation in your state for the debt. If the Debt statue has passed this can be a very good defense to win your case. If it is not past then I would not even bother showing up. It will be an automatic win for the plaintiff. What you should have done was send a "Prove the debt" letter. This would have forced them to send all the information about the debt and prove it is indeed yours. You only have that option within 30 days of the debt request.
Peggy C.
Harleysville, PA  |  March 08, 2012
How do I go about finding any and all judgements against me. I pulled my credit reports and found the same ONE listed on each of my reports. My bank account was temporarily frozen by a creditor who said they had issued a judgement against my bank account, but when I inquired as to the name of the creditor, it was not the same judgement that I saw on my report. In fact, I was told there were several. How can I find out who they are and what I owe? I live in PA
Bills.com
March 09, 2012
A credit report is a start, but there is no guarantee your credit report will contain complete and accurate information, especially regarding public documents like judgments. Think of a credit report as a really bad newspaper — sometimes the information published is complete and accurate, and sometimes it's not.

Consult with a lawyer who has civil litigation or consumer law experience. He or she will need to conduct research to uncover your judgments.
James F.
Dover, PA  |  October 31, 2011
Here are the facts ... I am still looking for an answer. 1. My wife and I are currently under a sales agreement, for the purchase of our home, from a family member who owns the property outright (does not owe on it) 2. I am getting a new mortgage loan, to purchase the house we are living in now, and buying, under the sales agreement. 3. When the title search was completed, a notice of judgment was found in my name. 4. Title company said that the judgment lien will be removed when the final title is issued, as it is in my name alone and does not include my wife. Tenancy by the entirety ... or something like that. Question 1: Will this judgment lien come back on, once the sale transaction is completed? Question 2: If this does come back on, can we sell the house or refinance it at a later time, with this judgment, only in the name of one spouse and not both? Thanks. James.
Bills.com
November 01, 2011
I can't give you legal advice, James. Only an attorney can properly do so. I will share a few non-legal opinions with you.

It is my experience that lenders require all judgments against any borrower listed on the application to be paid off or the loan will not close. I would check with the lender, as opposed to hearing what the Title Co. has to say about this.

If you are somehow able to close the loan with the judgment, it is my opinion that the presence of the judgment would be an encumberance to a future sale or refinance.

If you require further clarification, please consult with an attorney.
JAMES F.
Dover, PA  |  October 28, 2011
My Wife and I are buying a home, from a family member, under a sales agreement. It is filed with the court. As part of the process to secure a loan in my name alone, I am in the process of a home loan. It came to light, that there is a notice of judgment, in my name. It was found during the title search. Now the home is in both mine and my wifes name and as I understand it, is covered under the Tenancy In Its Entirety law. My questions are: - The abstract/title company is saying that the new title, when issued, will have this notice of judgment removed as it does not apply. I am curious, as to the legal reasoning for that? Is that because of the Tenancy thing? - I was aware there was a creditor that was not paid and that they did win a judgment but they never provided a writ to me, indicating a judgment was filed. Now, I know it was. Is this legal, on the part of the creditor to take this step and not inform me? If we were to refinance down the road, and this judgment lien is still there, will I be able to refinance? From what I have read, the Tenancy in its Entirety remains until death of the debtor or divorce. Please help ... Looking for some answers. J.
Bills.com
October 28, 2011
If I understand the facts of your question correctly, a creditor filed a personal judgment against you, which came to light when you applied for a loan. I doubt the judgment appeared during the title search of the property you are buying. The judgment would not encumber a property you previously did not own.

It is more likely that the judgment appeared when the lender's underwriting department pulled your credit report and discovered the judgment in the public records section of your credit report. I doubt the future interest you chose for the title of the property has anything to do with the old judgment.

Consult with a lawyer in your state who has property law experience to learn if my guesses here are accurate.
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James F.
Spring Grove, PA  |  October 28, 2011
I was informed by the title company, that it is listed under the title, for the house I am purchasing via a new home loan, that we are living in under a sales agreement. So, it is under the home I am purchasing because we already have that sales agreement filed at the court. It was done that way, so we could claim the mortgage interest. With all of the being said, the title company is removing the listing, because it is in one spouses name. Not both ... As the house is currently in both spouses name.
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Glenn G.
West Chester, PA  |  February 11, 2012
I have a buyer in same situation and worried it will hold up sale. Do you have the name and number of your title company I'd like to speak to them about this as I believe you are perfectly safe from existing or future debts or judgments only in one spouse's name, it's unique to Pennsylvania.
Allison M.
Up. Macungie Twp, PA  |  October 20, 2011
Is a debt from October 2004 to UGI, collectable now? A debt collection agency has just begun to contact me over a supposed balance from that year.I have no reccolection and not much in the way of records anymore from that time. I think I paid all of my debts when I sold that house and moved away. They are not showing up on my credit report. Thank-you
Bills.com
October 21, 2011
Let us look at the facts and terms you shared in your message, and others that were implied:
  • Time and Credit Reports. Seven years is how long most derogatory items can appear on a consumer's credit report file. The seven-year rule has nothing to do with charge off. It does not determine whether the debt is collectible. It also has nothing to do with a state's statute of limitations. See the Bills.com resource Fair Credit Reporting Act to learn more about what can appear on a credit report and for how long.
  • Charge-off / write-off. An accounting term that means a creditor has moved an account from its current-accounts book to its general ledger as a bad debt. It does not mean the account is canceled, forgiven, or extinguished. See the Bills.com resource Charge Off for a more complete discussion of this oft-misunderstood phrase.
  • Statute of Limitations. Just because a statute of limitations has passed does not mean a creditor may not collect a debt, except in Wisconsin. The passing of a statute of limitations gives a defendant in a lawsuit an affirmative defense, and nothing more. See Statute of Limitations to learn more.

A collection agent working on a debt older than a state's statute of limitations may contact the consumer to attempt to collect an ancient debt (except in Wisconsin). It can even file a lawsuit against the consumer. However, the consumer has an affirmative defense if there is such a lawsuit.

The 7-year clock does not reset when the consumer makes a payment or settles the debt. There is no reason, from a credit score perspective, to pay debt older than 7 years in age. If the creditor files an action — a lawsuit — against you, you may have an affirmative defense if your state's statute of limitations has passed.

My advice? Validate the debt.

B J D.
Lancaster, PA  |  October 12, 2011
Are private loans from before 2005 enforceable to collect in PA?
Bills.com
October 13, 2011
I assume what you are asking is, "If the statute of limitations on a consumer loan has passed, can the creditor file an action against the debtor?" In all jurisdictions but Wisconsin, the answer is "yes." The debtor/defendant has the right to raise a statute of limitations affirmative defense. A court will not raise this defense on behalf of the defendant. If the defendant raises this defense, and the court accepts it, the court will dismiss the case.
Elizabeth L.
Rochester, PA  |  September 15, 2011
So I have been going through my husband's credit report, but they only have a 24 month payment history. How do I obtain the payment history prior to that to see if the statute of limitations has passed without contacting the company and admitting that the debt is mine? I live in Pennsylvania and the statute of limitations is 4 years. What do I do after the time has passed? Who do I contact, what do I send, and how do I get it off of the credit report? Also, can you attempt to validate a debt when there is a judgement already in place especially if this is the first contact the company has made with or? Or is it too late at that point? Thanks for all of the help. You have no idea how you have eased my worries so far in the process!
Bills.com
September 15, 2011
I suspect there are significant facts in your situation that you did not share, which makes me reluctant to offer an opinion on your situation.

Regarding the judgment, consult with a lawyer in your state who has civil litigation experience. The defendant should have received notice of the lawsuit. If the consumer's first notice of a judgment is its appearance on a credit report, then the plaintiff did not follow state or federal civil procedure rules.

Regarding the state statute of limitations and the appearance of a derogatory on a credit report, the two have no relationship to each other. The FCRA, a federal law, controls the behavior of the consumer credit reporting agencies. Under the FCRA, most derogatories can appear on a credit report for 7½ years after the date of first delinquency. Judgments and bankruptcies can appear for 10 years. The 7½-year rule has no relationship to a state's statute of limitations on a consumer debt.
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