Tennessee Collection Laws

Tennessee Capitol | Tennessee collection laws

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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/Type Years Statute
Tennessee statutes of limitations. Source: Bills.com
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
Judgment 10** 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

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.

20 Comments
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  • D
    Don,
    Oct, 2020

    Can a loan company turn you over to collection and after they tell you they can't talk to you you have to talk with collection they comeback two years that and bank draft you account is this legal? Please help

    • 35x35
      Daniel,
      Oct, 2020

      Don, I am not a lawyer so I can't give you legal advice or tell you if what happened is legal or not.

      Apparently, the bank thought the order to hit your account was proper.  Ask the bank how long the permission to draft remains in effect. It could be that it remains as long as the debt exists, unless you cancel it.

      Regarding the original creditor taking back the debt, one possibility is that they owned the debt the whole time, but contracted with a collection agency to collect from you, as opposed to selling the legal right to pursue collections on the debt.

  • K
    Keisha Tyler,
    Oct, 2020

    Can payday loans if not paid garnish my wages?

    • 35x35
      Daniel,
      Oct, 2020

      Keisha, I am not a lawyer, so my answer should not be taken as legal advice.

      If you default on a payday loan, the lender can file suit against you.

  • B
    Bhar,
    Jun, 2020

    I have had a wage garnishment due to a home foreclosure that I have been paying on without fail for several years. My employer shows the the amount on the original judgment now paid. However the bank the original mortgage was with has sold and now the bank who bought it out says we still owe several thousand dollars more than the amount on the court judgement. We can't get any explanation from the current bank and the court says we must have a release from them. Can interested be added or can the new bank add fees, unknown to us causing the original garnishment amount to be increased? I understood the total amount was the judgement amount. I tried to do the right thing and pay the debt I owed and not file bankruptcy but this getting to be impossible. Any advice?

    • 35x35
      Daniel,
      Jun, 2020

      Judgments in Tennessee have interest addedw. This page from the Tennessee Courts shows the interest rate going back to 2012. If the judgment pre-dated 2012, I am not 100% sure what the interest is, but I believe it was 10%.

  • W
    Wright,
    May, 2020

    I made a loan from a financial company for 2400. And get a pension check . I’ve paid them back over 3500.00 and the payment isn’t going down it’s going up because they take over 600 from my bank account amount. Can they put a levy on my account and a lien on my car if I stop the payment if I change my bank

    • 35x35
      Daniel,
      Jul, 2020

      Ruthie, if you stop paying a loan the account will be reported to the credit bureaus as delinquent, if the creditor reports monthly. The account could go to collections and you could be sued. Only if you are sued would a lender have authority to garnish your accounts. The exception is if you have a car loan and bank account at the same place you got the loan. If that is the case, then stopping payment on the loan could put your car and fundsi in your acccount at risk.

  • J
    J Resendez,
    Apr, 2020

    I had a Ford F 150 truck 2010 I had it a year or less when I live in Texas loss job ! Ask the lenders if he could lower my my payment so keep it said no and couldn’t refinance! I then said go ahead and pick it up ! Now I retired and move to Tennessee in 2017 to present received a letter asking to make arrangements to 50.00 a month until 2000.00 of it would be pay if not they would void the letter I would owe 19082.00 it has been from 2010 - 4/30 /2020 please advise!

    • 35x35
      Daniel,
      Apr, 2020

      J, I am not a lawyer and lawyers are the only people who can give legal advice. I will share some information, but please do not consider it legal advice.

      My gut feeling is that they are trying to getyou to pay  a debt that you are not required to pay. The statute of limitations on debt in Texas is 4 years for a written contract. It is possible to restart the clock on the SOL when you make any payment. In some states even a commitment to pay the debt can restart the clock.

      I recommend that you contact an attorney that specializes in violations of the FDCPA (Fair Debt Collection Practices Act). This kind of attorney doesn't charge you a fee but will take the case if they feel they can win and get money from the creditor harassing you. Do a search online for "FDCPA attorney" and the name of the city in which you live. Please report back on how things go for you!

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