Learn Your Rights as a New Jersey Consumer Regarding Collections
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 use the law to collect a debt, the creditor must go to court to receive a judgment. See the Bills.com resources Served Summons and Complaint and How to Answer a Summons & Complaint to learn more about this process.
The court may decide to grant a judgment to the creditor, and will do so automatically if the defendant fails to mount any defense. A judgment is a declaration by a court that the creditor has a legal right to demand a wage garnishment, a levy on the debtor’s bank accounts, a lien on the debtor’s property, and seize his or her personal property. A creditor who 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.
In New Jersey, collections-related laws are found in the New Jersey Statutes Annotated. In particular, see Rule 4:59, to learn the process for enforcing judgments. We cite the relevant sections below.
New Jersey Wage Garnishment
The most common method used by judgment-creditors to enforce judgments is wage garnishment. This is where a judgment creditor contacts the debtor’s employer and require the employer to withhold a certain portion of the debtor’s wages each pay period and send the money to the creditor. However, several states, including Texas, Pennsylvania, 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’s laws.
New Jersey’s wage garnishment rules are found in New Jersey N.J.S.A. 2A: 17-56. Under New Jersey law, a wage garnishment is possible if you earn more than $217.50 per week and your net pay after taxes and mandatory deductions is more than $154.50 per week. If your gross earnings are less than 217.50 and your net take-home pay is $154.50 per week or less, you are exempt from wage garnishment. Otherwise, garnishment is limited to 10 percent of your gross pay before taxes. If you earn $600 per week before taxes, a judgment-creditor can garnish $60 per week, leaving you with $540 to pay your other bills. The law protects you from two judgment-creditors garnishing you at the same time. The judgment-creditor with the first judgment gets priority, and any others must wait until the first debt is satisfied before another garnishment can go into effect.
New Jersey residents must receive an advance notice of a wage garnishment. If you do, you have the right to object to the garnishment. Consult with a New Jersey lawyer who has consumer law experience and file an objection with the court immediately.
Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal law. Garnishment of Social Security and pensions may be allowed for child support. Generally speaking, 401(K) or other retirement funds are exempt from garnishment.
If you reside in another state, see the Bills.com Wage Garnishment article to learn more.
Levy Financial 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. In some states levy is called attachment or account garnishment. The names may vary but the concept is the same.
In New Jersey, a judgment-creditor must follow specific procedures before it can enforce a judgment, such as levy a bank or credit union account. Two significant rules are:
- A New Jersey court must the the consumer prior notice of the judgment-debtor’s intention to levy the consumer’s accounts.
- Some part of the consumer’s deposits into their bank account are exempt from levy.
See the New Jersey Courts Rule 6:7. Process to Enforce Judgments to learn more.
New Jersey Lien
A judgment lien can be attached to the debtor’s real estate and personal property. In New Jersey Law courts, a judgment lien is created automatically on the debtor’s present and future property located anywhere in New Jersey. New Jersey judgment-liens remain attached to the debtor’s property for 20 years, even if the property is sold. To learn more, see N.J.S.A. 2A:14-5, 2A:26-9 to 2A:26-11.
New Jersey also allows contractor’s liens for tradesmen.
New Jersey Statutes of Limitations
Each state has its own statutes of limitations. Here are the New Jersey statute of limitations relating to consumer debt:
- Credit cards: 6 years (N.J.S.A. 2A: 14-1) The same also applies to oral and written non-sales contracts, and promissory notes
- Sale of goods that fall under the UCC: 4 years (N.J.S.A. 12A: 2-725
- Conversion of an instrument for money: 3 years (N.J.S.A. 12A: 3-118(g))
- Real or personal property damage, recovery and contracts not under seal: 6 years (N.J.S.A. 2A: 14-1)
- Demand Notes when no demand is made: 10 years. If demand made: 6 years from date of demand, (N.J.S.A. 12A: 3-118(b))
- Obligations under seal for the payment of money only, except bank, merchant, finance company or other financial institution: 16 years, (N.J.S.A. 2A: 14-4) actions for unpaid rent if lease agreement is under seal, (N.J.S.A. 2A: 14-4)
- Real estate: 20 years, (N.J.S.A. 2A: 14-7)
- Judgments: 20 years, renewable (2A: 14-5)
- New Jersey or foreign judgments: 20 years (unless period in foreign originating jurisdiction is less) (N.J.S.A. 2A: 14-5)
- Unaccepted drafts: 3 years from date of dishonor or 10 years from date of draft, whichever expires first (N.J.S.A. 12A: 3-118(c))
New Jersey law allows home loan lenders to foreclose using the court system, and non-judicial foreclosure is not allowed in this state. The timeline to complete the foreclosure process is usually 90 days. The lender must give the homeowner notice 10 day before the foreclosure sale. New Jersey allows lenders to collect deficiency balances, and homeowners have a right to redemption.
New Jersey Spousal Debt Liability
When it comes to family law, New Jersey is a common law state. This means New Jersey courts presume that each spouse's separate debt incurred during the marriage is separate. Creditors cannot pursue one spouse for the other's debt.
The exception is for "necessities" such as medical debt. New Jersey follows the doctrine of necessaries, which requires spouses to pay for the necessary expenses of the other spouse.
The New Jersey Supreme Court interpreted this to mean that credit card expenses used to support the household were necessary, and were covered by the doctrine of necessaries (Monte v. Monte, 212 N.J. Super. 557 (App. Div. 1986)).
Consult with an attorney licensed in New Jersey and experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in New Jersey.