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 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.
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.
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
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 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.
I hope this information helps you Find. Learn & Save.
Best,
Bill
Sunbury, PA | April 05, 2013
April 05, 2013
- Call the original creditor and ask for the name of the collection agent it assigned your collection account to.
- Wait for the collection agent to contact you again.
A less-reliable third option is to access one of your three credit reports at AnnualCreditReport.com to see if the name and telephone number of the collection account in question is listed on that credit report.
Mckeesport, PA | March 11, 2013
March 14, 2013
Credit card collection accounts are bought and sold for pennies on the dollar. When the original creditor sold the account with the $600 balance to a broker or collection agent, it did so for about $50. Most states allow collection agents to add a certain amount of annual interest to collection accounts, and without doing the math it appears the collection agents exceeded most states' usury rate by a wide margin.
Armed with what I just wrote, open a negotiation with the newest collection agent and offer it $100 as a final settlement on the account. It may feign offense at you offering it what might appear to be a small amount. That's part of the game. If it will not negotiate reasonably, then invite it to file a lawsuit against you so that it can try to explain how a $600 debt became an $1,800 debt over the course of 6 years, and how that complies with Pennsylvania's usury law.
If you find yourself a defendant in a civil lawsuit, consult with a lawyer who has consumer law or civil litigation experience.
Shenango, PA | June 14, 2012
June 15, 2012
You can try the methods that credit repair companies use, by hiring a credit repair firm or trying it on your own.
April 23, 2012
April 23, 2012
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.
T/o Stroud, PA | March 28, 2012
March 28, 2012
Harrisburg, PA | March 14, 2012
March 14, 2012
Lower Macungie Tw, PA | March 13, 2012
March 13, 2012
T/o Stroud, PA | April 24, 2012
Harleysville, PA | March 08, 2012
March 09, 2012
Consult with a lawyer who has civil litigation or consumer law experience. He or she will need to conduct research to uncover your judgments.
Dover, PA | October 31, 2011
November 01, 2011
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.
Dover, PA | October 28, 2011
October 28, 2011
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.
Spring Grove, PA | October 28, 2011
West Chester, PA | February 11, 2012
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