Learn Kentucky's Rules For Garnishment, Liens, and Foreclosure
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.
Kentucky Wage Garnishment
The most common remedy judgment-creditors use to enforce judgments is wage garnishment. Here, the judgment-creditor contacts 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 — Texas, Pennsylvania, and North Carolina — do not allow wage garnishment for the enforcement of most judgments.
Kentucky allows wage garnishment. Kentucky follows federal rules, and exempts 25% of the judgment-debtor's disposable earnings (KRS 425.506).
Levy Bank Accounts in Kentucky
A levy means the creditor has the right to take non-exempt money in a debtor’s account and apply the funds to the balance of the judgment. 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.
Kentucky allows bank account levy, which state law refers to as "non-wage garnishment" (KRS 425.50.) For bank account attachment, Kentucky courts have held a party to a joint account is presumed to own the entire joint account. Upon notice and objection, the debtor or third-party account tenant may rebut that presumption by proof of separate net contributions to the account, and a showing of an intention that the non-contributor's use of the other's contributions be limited. (Brown v. Commonwealth of Kentucky, 40 S.W.3d 873 (KY App. 1999)).
Kentucky Lien Law
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 Kentucky, a judgment lien can be attached to real estate or personal property. Execution may be issued 10 days after the entry of judgment. Execution is issued by the clerk of the court to the Sheriff who makes a return of service on the execution within 90 days (KRS 426.010. Kentucky exempts the following:
- one motor vehicle up to $2,500
- household furnishings, jewelry, clothing and ornaments up to $3,000
- tools up to $300
- homestead up to $5,000
- retirement plans, pensions and insurance proceeds totally exempt
- Kentucky has adopted the federal bankruptcy exemptions
See KRS 427 to learn more about Kentucky’s exemptions.
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Kentucky Statute of Limitations
Each state or commonwealth has its own statute of limitations on civil matters. Here are some of Kentucky’s statute of limitations for consumer-related issues:
|Credit card||5||KRS 413.120|
|Written contract||15*||KRS 413.090|
|Mortgage contract||3||KRS 413.120 and 413.080|
|Promissory note||5||KRS 413.120|
| * Kentucky adopted the 4 year Uniform Commercial Code (UCC) statute of limitations with regard to contracts for the sale of goods and lease contracts. |
** Can be renewed.
When the statute of limitations clock starts depends on the circumstances and the particular statute. In most states, the clock starts when the action accrues. In Kentucky, the clock starts from the date of default. The clock may be paused (called "tolled") under some circumstances, or renewed.
A lender will foreclose judicially in Kentucky. This takes 150 days, typically. Under Kentucky's anti-deficiency law, a deficiency judgment is entered automatically if the sale proceeds less expenses are not sufficient to cover the debt owed. See KRS Chapter 426 to learn more.
Kentucky Spousal Debt Liability
Kentucky is a "marital property" state, and adopted a few characteristics of community property law. When a Kentucky couple divorces, marital property, which is property or wealth acquired during marriage, in divided in just proportions, most likely equally (KRS Title 35 Chapter 403 et seq). Kentucky is not a community property state, so the general rule is one spouse not liable for the other spouse's separate debt, with the exception of medical debt.
Kentucky follows the doctrine of necessaries for medical debt. In Kentucky, a husband is liable for his wife's medical expenses regardless of their respective financial situations. A wife is not liable for her husband's medical expenses. (See Rhodus v. Proctor, 433 S.W.2d 625; Carpenter v. Hazelrigg, 45 S.W. 666, Atkins v. Atkins' Adm'r, 262 S.W. 268; Somerset Manor, LLC v. Rees, 2011 Ky. App. Unpub. LEXIS 532; and Adams v. Riddle, 2010 Ky. App. Unpub. LEXIS 151.)
Consult with a Kentucky lawyer who is experienced in civil litigation to get precise answers to your questions about liens, levies, garnishment, and foreclosure.