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Winning a lawsuit and obtaining a judgment does not always mean a creditor will immediately receive payment. When a debtor does not voluntarily satisfy a judgment, creditors may need to use post-judgment collection methods to recover what they are owed. In Colorado, those methods can include garnishing wages or funds held in a bank account.
At Douglas D. Koktavy, we represent creditors in Denver and throughout Colorado in collection and judgment enforcement matters. Garnishment can be an effective collection tool, but creditors must follow Colorado procedures and account for exemptions that may protect some of a debtor’s income or property.
Garnishment is a legal process that allows a creditor to pursue money or property belonging to a debtor but held by another person or entity.
The third party holding the money or property is generally known as the garnishee.
Two common examples involve an employer holding wages owed to an employee and a financial institution holding money in a customer’s account. Depending on the circumstances, a creditor may pursue garnishment to collect some of those funds after obtaining an enforceable judgment.
Our Denver collections attorneys represent creditors seeking to enforce judgments through garnishment and other post-judgment remedies in Colorado.
For ordinary debt collection, a creditor generally must first establish the debt through the appropriate legal process and obtain a judgment before using post-judgment garnishment remedies.
Obtaining the judgment and collecting the judgment are therefore separate stages.
A creditor may prevail in a lawsuit over an unpaid debt, promissory note, contract, deficiency balance, or other obligation. If the debtor does not pay the resulting judgment voluntarily, the creditor can then evaluate available enforcement options.
Depending on the debtor’s circumstances, garnishment may be one of those options.
A wage garnishment directs an employer to withhold an allowable portion of a judgment debtor’s earnings and remit those funds as required by the garnishment process.
However, a creditor cannot simply demand that an employer turn over all of an employee’s paycheck.
Colorado law limits the amount of earnings that can be garnished. Applicable limits are designed to leave the debtor with a protected portion of their earnings. The amount available for garnishment can depend on factors such as disposable earnings and applicable statutory thresholds.
That makes calculating a wage garnishment more involved than taking a fixed amount from every paycheck.
Creditors also need to follow the proper procedural requirements when issuing and maintaining the garnishment.
A wage garnishment can differ from a one-time attempt to reach money in an account because wages are paid on an ongoing basis.
Douglas D. Koktavy’s Denver collections practice notes that writs of garnishment on earnings can remain effective for 180 days in Colorado. A creditor may need to renew a garnishment when appropriate if the judgment remains unpaid after that period.
This can make wage garnishment useful when a debtor has regular employment but cannot or will not satisfy the judgment in a lump sum.
Creditors should keep accurate records of amounts received and the remaining balance. Interest, costs, payments, and other factors may affect the amount still due.
Bank account garnishment is another potential method for enforcing a Colorado judgment.
Rather than directing an employer to withhold future earnings, this form of garnishment seeks eligible funds held by a financial institution for the debtor.
Timing can therefore be important.
The amount available in an account may change considerably from one day to another. A debtor might also have multiple accounts at different institutions, making accurate information about the debtor’s assets valuable when determining an appropriate collection strategy.
Creditors must also remember that the existence of money in an account does not necessarily mean every dollar is available for collection.
Yes. Colorado and federal law provide protections for certain income and property.
Exemptions are a critical part of the garnishment process because they can limit what a creditor is legally permitted to collect.
Depending on the circumstances, protected funds may include certain government benefits or other income and assets covered by applicable exemption laws. Wage garnishments are also subject to statutory limitations on the amount that can be withheld.
Bank account garnishments can raise additional questions when exempt funds have been deposited into an account.
A creditor should therefore evaluate applicable exemptions rather than assuming the full balance of a bank account or paycheck is collectible.
Failure to follow exemption rules and garnishment procedures can cause delays and potentially create additional legal issues.
The specific procedure depends on the type of garnishment involved.
Generally, the garnishee must respond according to the applicable Colorado rules. An employer may be required to calculate and withhold eligible earnings, while a bank may be required to address funds held for the judgment debtor.
The debtor also has rights during this process and may claim that certain funds or property are exempt.
This is one reason careful paperwork matters. Garnishment is a court-regulated collection procedure, not an informal request for payment.
Creditors should make sure the appropriate forms are used, deadlines are observed, service is completed correctly, and amounts collected are properly credited against the judgment.
Not necessarily.
The right collection strategy depends on the debtor and the nature of the obligation.
A wage garnishment may make sense when an individual debtor has steady employment. Bank account garnishment may be more useful when reliable information indicates that collectible funds are held at a financial institution.
Other circumstances may call for different remedies.
Depending on the case, Colorado creditors may consider:
A creditor may also encounter complications if a debtor files for bankruptcy. The automatic stay can restrict collection activity, making it important to determine whether further enforcement is legally permitted.
A judgment is most useful when the creditor has a realistic strategy for enforcement.
Information about the debtor’s employment, financial accounts, property, business interests, and other assets can help determine which collection tools may be effective.
For example, repeatedly attempting wage garnishment against someone who is not employed may accomplish little. Likewise, pursuing a bank garnishment without reliable information about where the debtor banks may waste time and resources.
Creditors should consider the likely costs and benefits of each enforcement method.
At Douglas D. Koktavy, we work with banks, credit unions, auto finance companies, businesses, and other creditors to evaluate collection strategies based on the particular circumstances of the debtor and judgment.
Bankruptcy can significantly affect garnishment and other collection efforts.
The filing of a bankruptcy case generally triggers an automatic stay that prohibits many collection activities. A creditor that has already begun garnishment proceedings should determine how the bankruptcy affects those efforts before taking further action.
Creditors may still have important rights in bankruptcy, particularly when secured debts, collateral, priority issues, or other creditor interests are involved.
The key is recognizing that ordinary state-court collection procedures and federal bankruptcy proceedings interact in ways that can affect enforcement.
Continuing collection activity without considering an active bankruptcy case can create serious problems.
Obtaining a judgment may only be the beginning of the collection process. Creditors still need to determine which assets are available, select an appropriate enforcement method, and comply with Colorado’s procedural requirements.
Wage and bank account garnishments can provide effective ways to enforce judgments, but they must be handled correctly.
At Douglas D. Koktavy, we represent creditors in Denver and throughout Colorado in collections, garnishments, judgment enforcement, bankruptcy, and other creditor rights matters.
A creditor may be able to use wage or bank account garnishment when a debtor fails to satisfy an enforceable Colorado judgment. The appropriate strategy depends on the debtor’s assets, applicable exemptions, and the circumstances surrounding the debt.
If you are dealing with an unpaid judgment or other creditor rights issue in Denver or elsewhere in Colorado, our attorneys are here to help. Call us today or connect with us online to schedule a consultation.
