When you own and operate a business that lends out money, goods or services, it is likely that at some point you will have to collect from debtors who cannot pay you back. The law may be confusing when it comes to which assets or income are exempt from collections. Not only are certain types of income or benefits exempt from collection, but there are laws concerning the percentage of income that is eligible for garnishment.
Under Federal and New York state laws, certain types of income are not eligible for collection to repay creditors. While this list is not exhaustive, these are some of the most common benefits and income exempt from collection efforts:
- Retirement savings accounts and IRA accounts
- Social Security payments
- Child support or alimony
- Unemployment benefits
- Private and public pensions
- Public assistance
Garnishments happen when a creditor can receive part of a debtor’s paycheck for the debt automatically. This is convenient because the debtor’s employer sends payments straight to the creditor when it processes payroll.
In certain circumstances, however, a debtor’s income is not eligible for garnishment. For example, if the debtor’s check is 30 times less than the minimum wage after taxes, that salary is not eligible for garnishment. Once the debtor earns over that amount, however, 25% of the debtors remaining check is recoverable by the creditor.
It is interesting to note that only one creditor at a time can garnish a person’s wages regardless of the number of debts owed. For more information on this subject please visit our page on creditors’ rights.