A lender, collection agent or law firm that owns a collection account is a creditor. The law gives creditors several means of collecting delinquent debt. But before a creditor can start, the creditor must go to court to receive a judgment. See the Bills.com article Served Summons and Complaint to learn more about this process.
The court may grant a judgment to the creditor. A judgment is a declaration by a court the creditor has the legal right to demand a wage garnishment, a levy on the debtor’s bank accounts, a lien on the debtor’s property, and in some states, ask a sheriff to seize the debtor’s personal property. The laws calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which of these tools a judgment-creditor will use depends on the circumstances. We discuss each of these remedies below.
The most common remedy judgment-creditors use to enforce judgments is wage garnishment. The judgment-creditor contacts the debtor’s employer and requires the employer to deduct a certain portion of the debtor’s wages each pay period and send the money to the creditor.
Tennessee exempts 75% of your wages for most garnishments, and 50% for child support (TCA 26-2-106). Tennessee law adds an exemption of $2.50 for each of the garnishee’s dependent children under 16 years of age who resides in the state of Tennessee (TCA 26-2-107). Creditors can add the costs of wage garnishments to what the defendant owes (TCA 26-2-106(c)).
If you reside in another state, see the Bills.com Wage Garnishment article to learn more.
A levy means the creditor has the right to take whatever money is 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.
Tennessee law exempts certain amounts from levy. Below are some of the available exemptions:
See TCA 26-2-103, 26-2-106 and 26-2-111 to learn more about Tennessee exemptions.
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.
In Tennessee, a judgment lien can be attached to real estate. The term of a lien is 10 years (TN Rules of Civil Procedure Rule 69.07).
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Each state has its own statute of limitations on civil matters. Here are some of Tennessee’s statutes of limitations for consumer-related issues:
|Credit card / open accounts||6*||TCA 28-3-109|
|Spoken or written contract||6||TCA 28-3-109|
|Injury to personal or real property||3||TCA 28-3-109|
|Judgment Lien||10||TCA 25-5-101 through 107|
| * Tennessee courts consider credit card accounts as open accounts and subject to the written contract statute of limitations. |
** Can be renewed for an additional 10 years under Rule 69.04
When the statute of limitations clock starts depends on the circumstances and the particular statute. In Tennessee, the credit statute of limitations begins on the date of the last recorded payment against the debt or the contract date, if there has been no payment.
Tennessee mortgage and foreclosure laws can be found in TCA 35-5-101 to 35-5-111, and 66-8-101 to 66-8-102. See also TCA 45-20-101 to 45-20-111, which is called the Tennessee Home Loan Protection Act. A lender may foreclose judicially or non-judicially in Tennessee. The common method is non-judicial, and takes a minimum of 40 days after the first default. A notice of foreclosure must be given to the homeowner 20 or 30 days before the sale occurs, depending on how the lender delivers the notice.
Tennessee does not offer an anti-deficiency rule if a deficiency balance exists after a foreclosure.
Under Tennessee law, it is crime to prevent a creditor from repossessing a secured item. See the Bills.com resource Tennessee 39-14-116 to learn more about this law.
The Tennessee Supreme Court decided the common law doctrine of necessaries applies for mutual support obligations on both husbands and wives (see Kilbourne v. Hanzelik, 648 S.W.2d 932, 934 (Tenn. 1983); Estate of Francis v. Francis, No. M2000-01110-COA-R3-CV, 2001 WL 673699, at *6 (Tenn. Ct. App. M.S., June 18, 2001)). In Tennessee, and other states, a provider of medical services can make out a prima facie claim for recovery under the necessaries doctrine by proving that (1) it provided medical services to the receiving spouse, (2) the medical services were necessary for the receiving spouse’s health and well-being, (3) the person from whom recovery is sought was married to the receiving spouse when the services were provided, and (4) payment for the services has not been made (Outpatient Diagnostic Center v. Ralph Christian, No. 01A01-9510-CV-00467, (Tenn. Ct. App., April 30, 1997)).
Consult with a Tennessee lawyer who is experienced in civil litigation to get precise answers to your questions about liens, levies, garnishment, and foreclosure.