Tennessee Collection Laws

Tennessee Collection Laws
IN THIS ARTICLE:
  • Tennessee allows parents of minor children a larger exemption for wage garnishment.
  • Credit card debts have a 6-year statute of limitations in Tennessee.
  • Tennessee law allows a relatively quick foreclosure timeline.

Learn Tennessee'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.

Garnishment

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.

In most states, creditors may garnish between 10% and 25% of your wages, with the percentage allowed determined by state law. See the Bills.com Wage Garnishment article to learn more.

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)).

Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal or Tennessee law (see list below).

If you reside in another state, see the Bills.com Wage Garnishment article to learn more.

Levy Bank Accounts

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:

  • Homestead exemptions: $5,000 for a single owner; $7,500 for joint owners; $25,000 if at least one dependent is a minor child, and can be doubled.
  • Social Security, unemployment compensation, Families First program benefit or a local public assistance benefit
  • Veteran’s benefits
  • Disability, illness, or unemployment benefit, or a pension that vests as a result of disability
  • A payment under a stock bonus, pension, profit sharing, annuity, or similar plan or contract on account of death, age or length of service
  • Some alimony
  • Some child support payments

See TCA 26-2-103, 26-2-106 and 26-2-111 to learn more about Tennessee exemptions.

Lien

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.

Consult with the Bills.com Debt Coach to learn your options for resolving debt, and the costs and time to debt freedom for each.

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.

Tennessee Statute of Limitations

Each state has its own statute of limitations on civil matters. Here are some of Tennessee’s statutes of limitations for consumer-related issues:

Account/TypeYearsStatute
Credit card / open accounts6*TCA 28-3-109
Spoken or written contract6TCA 28-3-109
Injury to personal or real property3TCA 28-3-109
Judgment Lien10TCA 25-5-101 through 107
Judgment10******TCA 28-3-110.
* 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

Tennessee statutes of limitations. Source: Bills.com

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.

Most courts find it is a violation of the FDCPA for a collection agent to pursue a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987). Some collection agents still do so in hopes the consumer will not know this rule.

Tennessee Foreclosure

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.

Hindering Secured Creditors

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.

Tennessee Doctrine of Necessaries

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)).

Recommendation

Consult with a Tennessee lawyer who is experienced in civil litigation to get precise answers to your questions about liens, levies, garnishment, and foreclosure.

30 Comments

jjoe, Mar, 2021

I owe a doctor bill of $176.12. I t was for work on 7/14/2020. I did not pay it, waiting for a final insurance decision. I had more work with this doctor. I also got a bill for $241.11. I did not know but the $176.12 had been sent to collections. That notation WAS on the bill, I just looked at what I owed the doctor and missed it. I paid the $241.11. Collections personal send bills. I called them on 3/2/2021, asking if we could work something out. I had $2400 in my HRA and $3600 in bills to pay. I thought if I could get a break, all could get most of what they were asking for. I was hoping for 33% off, so everyone could get paid 67% The person I spoke with put me on hold a few times to "talk to a supervisor" and finally agreed to a 20% discount. I asked for a better deal & explained my situation. I was put on hold again so the person could "talk" to the supervisor again. She agreed on a 25% discount of $44.03, leaving a balance of $132.09 I agreed. I gave her all my info, even my credit card number. She said the computer couldn’t take the 25% discount and she now could only give me 20%. I again explained my situation and said I would check with all the other doctors I owe and get back to her. Since we settled on an amount, I tried to pay that amount, and they upped the amount, (refused the amount we agreed on) do I still owe them anything? Thanks.

JJoshua Abreu-Rosa, Aug, 2021

Hello Joe, 

Thank you for reaching out to us today. I am sorry that the collector is making this transaction very difficult. Joe, I want to make sure I am on the same page. You mentioned you and the collector eventually settle for 20%, it was 25% but it was reduced to 20% due to their software issues. I am assuming you attempted to make the payment to resolve at 20% but they upped the amount and refused to agree to the 20%. 

In general, collectors may not add interest, fees, expenses, or charges of any kind to the original debt. However, a collector may charge an additional amount if: 
The creditor included a condition for the fees or expenses in its agreement with you when you incurred the debt. 

If it is allowed in the state where the contract was created. 

Also, was this all verbal, or did you get this in writing? If it's verbal this may be harder to secure the 20% settlement. 

Here are the resources I utilized to provide my response. 

https://www.credit.com/debt/understanding-your-debt-collection-rights/


Regards, Josh 

 

JJeff in TN, Mar, 2021

So I understand a creditor can put a lien on your primary residence but they cannot force a sale of it in TN. Is this correct?

JJoshua Abreu-Rosa, Aug, 2021

Hello Jeff. 


Thank you for your question today. Please, do not take my answer to be legal advice as I am not an attorney. Only attorneys can offer legal advice.

According to the article, the Tennesse Collection Law could force a sale or foreclose if a payment to the loan is in default. 

I am assuming you may have some confusion regarding the Tennessee Foreclosure section. This section is separate from the Creditor Judgement. This section is about the owner defaulting on their payments to the loan that purchased the home. The bank and you would seek a solution to get you back the ownership. However, if you continue to be delinquent, that could potentially lead to force sale or eviction.

If you would like more accurate answers, please consult with a Tennesse Lawyer. 

Regards, Josh  

BBrenda, Jan, 2021

If a levy is issued to a bank after getting a judgement, what is that process in TN and how long does it take to actually receive money out of their account? I understand that all monies might not be accessible but will the bank contact me or the court and is there a waiting period to release the funds available?

JJoshua Abreu-Rosa, Aug, 2021

Hello Brenda. 

Thank you for reaching out. Please, do not take my answer to be legal advice as I am not an attorney. Only attorneys can offer legal advice. 

Generally, the creditor must provide a request to your bank showing proof of a legal judgment against you. Once the creditor makes the request, your bank will freeze your account and review the situation. Your bank might not notify you that a bank levy is in progress- and creditors might not alert you either. A levy is a strategy creditors typically use only after they have given up on other ways to collect from you. 

We would recommend speaking with an attorney to know your specific rights during this phase of the judgment. 

Regards, Josh 

OOmma, Jan, 2021

My check was garnished just over 5 years ago for unpaid rent for the full amount. But last year I started receiving letters from another collection agency saying I owed almost the same amount. I have the docket report that says everything was paid off. And the info they sent in the mail about the debt seem to align with the docket report dates & filings. A weird thing - the collections was listen on my credit report last year but the it was taken off. There's no history of it. I'm not in TN so I'm not sure what to do next.

JJoshua Abreu-Rosa, Aug, 2021

Hello Omma,

Thank you for reaching out. Have you shown the creditor your confirmed document number and the completion of the said debt?

Regards, Josh

MMaria, Dec, 2020

Hello, I need to understand the rules Tennessee has in place for Loan deductions, especially those around full recovery from final pay through payroll, do you have any detail? Thank you

JJoshua Abreu-Rosa, Aug, 2021

Hello Maria. 

Thank you for reaching out. Please, do not take my answer to be legal advice as I am not an attorney nor am I a certified, tax specialist. Only attorneys can offer legal advice and tax specialist can advise on tax code.

Generally, personal loans are not tax-deductible, other types of loans are. Interest paid on mortgages, student loans, and business loans often can be deducted from your annual taxes, effectively reducing your taxable income for the year.  

I am not sure what you meant regarding full recovery, final pay, and payroll. Maybe you can clarify in our next correspondence.

Regards, Josh