Editors’ note: this post only discusses exemptions in Minnesota. For a detailed explanation of exemptions in another state, please consult with a consumer attorney in your area.
Without question, dealing with garnishment is the most frustrating aspect of debt collection for consumers. Whether it’s a bank or wage garnishment, having a debt collector seize your hard-earned money is a significant disruption to your life and can cause a great deal of stress. But many sources of money are exempt from garnishment, which means that a debt collector can’t keep your money if it comes from one of those sources.
In Minnesota, virtually all forms of need-based government aid are exempt from garnishment. Some of the most common forms of need based aid are social security, supplemental security income (SSI), energy assistance, and medical assistance (MA). Other types of need based aid that are exempt include: Minnesota family investment program (MFIP), emergency assistance and emergency general assistance (EA & EGA), work first program, general assistance medical care (GAMC), and Minnesota supplemental assistance (MSA). This isn’t a complete list and virtually any form of government aid that you receive based on your income is probably exempt from garnishment under Minnesota law. Other common Minnesota exemptions include any money you receive for child support, unemployment benefits, workers’ compensation, and veterans’ benefits. Some of the less common exemption sources of funds include retirement pensions (up to a certain dollar amount), disability, and insurance proceeds for damages to exempt property (usually your home or vehicle). And while it’s not technically an exemption, under current Minnesota law a debt collector can’t keep money from a joint account that doesn’t belong to the judgment debtor.
If you’re facing a wage garnishment, it’s important to know that a debt collector can only take 25% of your after-tax wages. This exemption also applies if the debt collector garnishes your bank account after you deposited your pay check. And if you make only the federal minimum wage (or less) your wages are usually completely exempt from garnishment. Further, if you receive any form of need-based aid, such as those described above, your wages are totally exempt from garnishment. Minnesota law provides for this exemption if you currently receive need-based aid, or if you received any need-based aid in the last 6 months. This is an important provision for Minnesotans receiving energy assistance. Most recipients of energy assistance receive it from October through March, which make the recipient’s wages exempt for the entire year if she re-enrolls in the program the following season.
To claim an exemption, it’s important first to understand the garnishment process. This post gives a general overview of how the process works. For a wage garnishment, the debt collector must provide you with a form notifying you of their intent to garnish and an exemption form 10 days before starting the wage garnishment. To claim an exemption from a wage garnishment, all you have to do is write the appropriate exemptions on the exemption form and mail it back to the debt collector. It’s critical to do this immediately, or at least within 10 days of receiving the form. You should also provide proof of your exemption, such as your benefit notice, with the exemption form.
For a bank garnishment, you won’t get notice of the garnishment until 5 days after the bank freezes your money. Fill out the exemption form that the bank and debt collector mail to you, noting the appropriate exemption. You also need to provide proof that the funds that were seized by the bank arose from an exempt source. This last point is the cause of considerable confusion for consumers. It’s not enough to show the debt collector that you receive exempt money, you also have to prove that the funds that were actually seized contained this exempt money. Debt collectors will refer to this as “tracing”. Sending the debt collector a copy of your bank statements that show the deposit of exempt funds, along with your benefit statements will usually accomplish the task.
If you merely mail the completed exemption form to the debt collector, and fail to provide the required tracing, the debt collector will probably object to your exemption and refuse to return your money. If this happens, you should schedule a court hearing in front of a judge to determine whether your funds are exempt. Court administration will help you set up the hearing and provide notice of the hearing to the debt collector. On the day of your hearing, be sure to bring proof of your exemption AND bank statements proving the funds seized were from an exempt source. Failure to do so could delay the court’s decision or could lead to the court denying your exemption.
Finally, it’s important to understand that claiming an exemption when you’re not entitled to one could lead to the court ordering you to pay a penalty to the debt collector. Make sure any exemptions you claim are legitimate.
If you still have questions about garnishment, feel free to download my free guide How to Survive Garnishment. It’s packed with information and tips for handling garnishment and will answer most of your questions about the garnishment process. If the guide doesn’t answer all of your questions, I offer 30 minute consultations for $150.
And if you’re being garnished and were never served with a lawsuit, I may be able to help you stop the garnishment by vacating the underlying judgment. Feel free to use the contact form in the upper right corner of this page to contact me to discuss the possibility of getting the judgment vacated.
I recently had a client come into my office with a judgment entered against him by a debt collector. He admitted being served with the lawsuit, but thought it was bogus because the lawsuit didn’t have a court file number on it. And when he called the local courthouse to verify whether the lawsuit was legit, the court had no record of such a lawsuit. Based on this information, he didn’t respond to the lawsuit and the debt collector entered a default judgment and began garnishing his wages.
In virtually every state, a lawsuit is started by filing it with the court. But Minnesota is a unique state because a lawsuit is started by serving the defendant. Because of this quirk, a lawsuit in Minnesota will almost never have a court filing number. And the courts will not have a record of the lawsuit until the creditor files the lawsuit and pays the filing fee. But this doesn’t mean the lawsuit isn’t legitimate. If you’re served with a lawsuit in Minnesota, you MUST answer the lawsuit within 20 days. If you don’t answer the lawsuit, it’s likely that a default judgment will be entered against you without a court hearing.
So the first step to respond to a collection lawsuit is to answer it. An answer is a formal legal document that responds to each of the allegations in the lawsuit. Your answer should be in a format very similar to the lawsuit itself. It should have the same caption, which provides the applicable county and judicial district and names each of the parties. The body of your answer should either admit or deny each allegation in the lawsuit. It’s best to number each paragraph of your answer to correspond with each numbered paragraph of the lawsuit. If you don’t know whether an allegation is true or false, deny the allegation. When you’ve finished responding to each of the allegations, sign and date the answer. You then serve the answer by mailing a copy (keep the original for your records) to the debt collector’s lawyer, or the debt collector itself if they don’t have a lawyer. You don’t have to file your answer with the court and pay the filing fee until the debt collector does.
But answering the lawsuit is just the first step. When they get an answer, most debt collectors will serve you with written discovery, called interrogatories, request for production of documents, and requests for admission. You MUST respond to the debt collector’s discovery within 30 days. Pay particular attention to the requests for admission. If you don’t respond to each admission within 30 days, the admission will be considered completely true. You don’t want to inadvertently admit to owing the debt by not responding to the requests for admission.
If you properly respond to the discovery, the next step is usually a court hearing, most likely a summary judgment hearing. Make sure to respond to the debt collector’s motion papers by the deadline provided on the motion. Then, be sure to attend the hearing and explain to the judge why you do not owe the debt.
If you live in Minnesota and want help answering a debt collection lawsuit, feel free to contact me by using the contact form in the upper right corner of this page. I offer a number of flexible representation options, so even if you can only afford to pay a few hundred dollars, I might be able to help you.