Garnishment is a tool utilized by parties in a civil case to force payment of a legally recognized debt. Most incidences of garnishment occur directly, which is to say that the debtor’s wages and bank accounts are garnished. But every now and again, indirect garnishment takes place.
Right off the bat, indirect garnishment is not allowed in every state. Where it is allowed, it is tightly restricted. It is also very difficult to pull off. That could be why indirect garnishment is not a preferred method of collecting an outstanding debt.
Garnishing a Debtor’s Debtor
The best way to understand indirect garnishment is to talk about the losing parties and their debtor’s. Let us say a company takes a vendor to court over unpaid invoices. That vendor has its own invoices to deal with. All the customers that owed the vendor money are considered the vendor’s debtors.
Indirectly garnishing the vendor – as the losing party in a civil case – would amount to intercepting payments from the vendor’s customers. The court’s order essentially tells the customer to pay the winning party instead of the vendor.
Let’s compare this to direct garnishment to drive home the point. Imagine that same company taking an individual customer to court. Assuming the company wins, it can directly garnish the customer’s wages and bank accounts. Under wage garnishment, the individual’s employer is compelled to withhold a certain amount from every paycheck until the debt is fully satisfied. Under bank account garnishment, the debtor’s bank is compelled to seize a certain portion of his cash assets and transfer them to the winning party.
Continual and One-Off Garnishments
There are quite a few differences between direct and indirect garnishments, the biggest being the issue of continual garnishment. Idaho regulations provide a good example of this principle.
Under Idaho law, a judgment creditor (the winning party in a civil lawsuit) can obtain a continual garnishment order against the losing party’s wages. This means that the employer is required to withhold from the individual’s paycheck perpetually until the debt is fully paid. The judgment creditor does not have to ask for a new garnishment order in advance of every paycheck.
Where indirect garnishments are allowed by law, they tend to be governed by a one-off rule. The previous example of one company taking another to court would result in the winning party intercepting a single payment from the losing party’s customer. Every time the company wanted to garnish a vendor’s payment a new order of garnishment would have to be obtained. There are no continual orders for indirect garnishment.
This matters because the one-off orders need to be timed correctly. The losing party may have dozens of outstanding invoices that are paid on different dates. There is also the possibility of the vendor offering recurring services that result in future debts not yet incurred. The complexities of billing and invoicing, combined with the one-off nature of indirect garnishment, create circumstances that are difficult to navigate.
Not Always the Best Choice
Judgment Collectors, based in Salt Lake City, UT, explains that garnishment is not always the best choice for debt collection. There are more effective means to collect that do not require jumping through as many hoops. When garnishment is the only option, it is better than nothing.
Direct garnishment is allowed in most states. Indirect garnishment is another matter. It is legal in some states, but it is very difficult to pull off. It is designed to be that way as a means of offering some protection to judgment debtors. Otherwise, collection efforts could prove devastating.
