In some states, a debtor’s wages are generally not subject to garnishment. Here, however, debtor’s wages were directly deposited into the debtor’s account at I.B.M. Employees Southwest Federal Credit Union.

A judgment creditor thereafter garnished debtor’s account at the credit union and debtor brought an action to dissolve the garnishment, arguing that the funds in the account were his wages and, therefore, exempt under Texas law from attachment.

Here, the court held that:

The debtor’s automatic deposit of his wages into his credit union account are subject to garnishment by another creditor since the deposit itself changes the character of the protected wages.

The court found that once wages are paid and received by the wage-earner, whether paid directly or deposited into the debtor’s account, they cease to be protected and are subject to garnishment. Gerald Guiberson v. I.B.M. Employees Southwest Federal Credit Union (Texas Court of Appeals, Case No. 92-03011-CV),

EDITOR’S COMMENT

It is important to note that although a debtor’s wages may not be protected from garnishment once they are deposited into a financial institution’s account, other benefits, such as ADC, Veterans or Social Security benefits, have been extended protection against garnishment.

In the case of Jerry Edwards v. Patricia Henry, 97 Mich. App. 173, the plaintiff garnished debtor’s bank account which was, in part, comprised of a deposit of the debtor’s ADC benefits. The garnished account also contained wages from the debtor’s part-time job. Here, the court found that the wages in the account were subject to garnishment, however, the plaintiff was not permitted to attach the ADC benefits in debtor’s account.

The court noted that the federal statutes provide greater protection on government issued benefits.

Depending on the precise government benefit issued, the debtor’s account may be protected from garnishment even after it is deposited in debtor’s account.

For example, the statute protecting Veterans benefits provides shelter “either before or after receipt by the beneficiary.”

Author: Charles R. Harroun, Attorney at Law