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Garnishment
Also called wage garnishment, bank levy, third-party levy.
A post-judgment collection tool that orders a third party holding your money — a bank, a customer, a payment processor — to hand it to the creditor instead of to you.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
This is what a judgment turns into when the creditor decides to collect. The creditor serves a writ or notice on somebody who owes you money or holds your money, and that third party is legally obliged to freeze the funds and pay the creditor rather than you. The debtor is often not the first to know.
In commercial collections the targets are predictable: business operating accounts, merchant processor settlements, and account debtors who owe you on open invoices. A levy on the processor is particularly effective because it intercepts card settlements before they ever reach your bank.
What varies by state
Almost everything. Exemptions, notice requirements, how long a freeze lasts, whether the creditor needs a separate court order, and what a bank must do on receipt all differ state by state. New York's restraining notice, for example, works differently from a California writ of execution. Wage garnishment against an individual guarantor is capped by federal law and further limited by some states; a few states bar it almost entirely for ordinary debts.
Why it matters before you sign
Garnishment is downstream of judgment, and judgment is downstream of the documents. A confession of judgment, a jury waiver, and a forum-selection clause naming a distant state all shorten the distance between a missed payment and a frozen account.
Where this one catches people
Owners assume a judgment against the LLC can only reach the LLC's accounts. If you signed a personal guaranty and the creditor took judgment against you individually as well, your personal bank account is a target — and banks freeze the whole account on service, including funds that may ultimately be exempt, leaving you to claim the exemption after the money is already locked.
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Garnishment — common questions
What does garnishment mean?
A post-judgment collection tool that orders a third party holding your money — a bank, a customer, a payment processor — to hand it to the creditor instead of to you.
Where does garnishment catch people out?
Owners assume a judgment against the LLC can only reach the LLC's accounts. If you signed a personal guaranty and the creditor took judgment against you individually as well, your personal bank account is a target — and banks freeze the whole account on service, including funds that may ultimately be exempt, leaving you to claim the exemption after the money is already locked.
Is garnishment the same as an interest rate?
Garnishment is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does garnishment apply to?
It is not specific to one product — it appears across the market.
Is there a worked example of garnishment?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside garnishment?
Confession of judgment, Default, Guarantor, Judgment, Judgment lien.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.