What are my rights and liabilities regarding debt in Vermont?
I live in Vermont, and have been sued by one of my creditors on an old credit card. How can I fight this lawsuit? Will Vermont law protect my property and income if the creditor wins a judgment against me?
A collection agent or law firm that owns a collection account is a creditor. A creditor has several legal means of collecting a debt, if you are unable to pay the debt voluntarily. Before the creditor can start trying to force you to pay a debt, the creditor must go to court to receive a judgment. See the Bills.com resource Served Summons and Complaint to learn more about this process.
If you do not have a persuasive defense, admit to owing the debt, or fail to respond to the lawsuit or appear in court, the presiding judge may decide to grant a judgment to the creditor. A judgment is a declaration by a court that the creditor has the legal right to demand a wage garnishment, a levy on the debtor's bank accounts, and a lien on the debtor's property. A creditor that is granted a judgment is called a "judgment-creditor." Which of these tools the creditor will use, if any, depends on the circumstances. We discuss each of these remedies below.
The most common method used by judgment-creditors to enforce judgments is wage garnishment, in which a judgment creditor would contact 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, 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 determined by each state.
Vermont garnishment rules are found in Title 12, Chapter 121 of the Vermont Statutes Annotated, sections 3166 to 3172. Vermont's garnishment exemptions for consumer credit loans protect either (a) 85% of your weekly after-tax earnings, or (b) $290.00 of your weekly after-tax earnings (40 times the current federal minimum hourly wage of $7.25), whichever is larger. For non-consumer loans, such as debts incurred in business transactions, the Vermont exemptions generally follow those offered under federal law, which allows up to 25% of a worker's wages to be garnished. See the Dept. of Labor's Employment Law Guide - Wage Garnishment and the Dept. of the Treasury's Answers About Garnishments. Municipal and state employees may be garnished under Vermont law.
Anyone who received benefits in the past two months from one of the various public assistance programs administered by the Vermont Department for Children and Families or the Vermont Department of Health Access (DVHA) is 100% exempt from wage garnishment for the collection of consumer debts.
Involuntary attachment of Social Security benefits or pensions for payment of consumer debt is not permitted under federal law, and is therefore forbidden in all states, including Vermont. These benefits generally retain their exempt status even after they are deposited into a bank account, so a creditor cannot levy a bank account if the debtor can demonstrate that the money in the account came from pension or Social Security payments. Segregate those funds from any other income by depositing the benefits into a separate bank account to ensure financial accounting if you are concerned with a garnishment on those payments. Vermont law exempts payments made to a person under many insurance policies. However, once those funds are deposited into a bank account, they do not retain any exemption from attachment by judgment creditors.
If you reside in another state, see the Bills.com Wage Garnishment article to learn more.
Levy Bank Accounts
A levy is the legal means by which a creditor seizes property belonging to a debtor in order to satisfy a judgment. When most people refer to a levy, they are talking about a bank account levy, in which a creditor seizes funds held in your bank account to apply to the balance of its 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. In some states a bank account levy is called attachment or account garnishment. The names may vary but the concept is the same.
In Vermont, administrative levy is allowed under for recovery of taxes and unpaid child support, meaning that for those types of debt, no judgment is required to levy a debtor’s bank account. Vermont law exempts $700 of a debtor’s money on deposit from attachment. Legal Services Law Line of Vermont and Vermont Legal Aid offer guidance to consumers needing to request to stop a bank levy.
A lien is an encumbrance -- a claim -- on a property. When a judgment is recorded, it creates an automatic lien on all property owned by the judgment debtor, meaning that the creditor has a possible claim against the property. Creditors can also record liens against specific assets, a process usually reserved for a home or land (real 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.
Vermont laws governing liens are can be found in Title 9, Chapter 51 of the Vermont Statutes Annotated. Mechanics and contractors (and similar laborers and professionals) have the right to place a lien on property on which they have done work; these liens usually take precedence over liens for general debt obligations, as do tax liens and other liens for "priority" debts.
If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.
Vermont Statutes of Limitations
Each state has its own statute of limitations. The statute of Limitations for Vermont is found in Title 9A, Article 3, Chapter 118 of the Vermont Statutes Annotated. The statute of limitations for open accounts (credit cards) is three years (Section 9A-3-118(g)), and written contracts have a statute of limitations of six years (Sections 9A-3-118(a) and 9A-3-118(b)).
Consult with a Vermont attorney experienced in civil litigation to get precise answers to your questions about liens, levies, and garnishment in Vermont.
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