Collection agencies are known for their aggressive tactics. They'll do just about anything the law allows to collect a debt. If a collection agency gets a judgment against you in court, it can serve a wage garnishment on your employer to collect money directly from wages. However, the process is not that easy if you're self-employed.
Getting Judgment Against You
When you don't pay a financial obligation to a creditor such as a credit card company, a medical office or a gym, your creditor tries for a few months to get you to pay the balance due. Eventually, your creditor may assign the right to collect your past-due balance to a collection agency. After the assignment, the collection agency can sue you for the original balance owed plus collection costs, court fees and attorney fees. If you don't contest the lawsuit, or if you contest it and lose, the collection agency gets a judgment against you for the full amount you owe.
Once a collection agency obtains a judgment against you, the agency becomes a "judgment creditor." A judgment creditor can collect money directly from third parties that are holding funds for you, such as your employer or your bank. If an employer receives a wage garnishment, it must pay a portion of the employee's wages to the judgment creditor. The amount paid depends on factors such as the amount of the judgment, the employee's earnings and whether there are any other garnishments in place.
No Garnishment for Self-Employed
A collection agency can't garnish your wages if you are self-employed. A wage garnishment is directed at an employer, and a self-employed person is not an employer. The self-employed get their income by selling their goods and services to distributors or customers. There is no intermediary to withhold garnished funds from a self-employed person and turn them over to a judgment creditor. A collection agency must find another way to collect money from debtors who are self-employed.
Other Ways to Collect Money
Although a collection agency can't garnish your wages if you're self-employed, it can use other means to collect a judgment against you. If a creditor knows where you bank, it can file a garnishment and seize money from your bank account. A creditor can also file a lien against any real estate you own and start foreclosure proceedings against you. It can also file a lien against your personal property and force your property to be liquidated at a sheriff's sale, with the proceeds from the sale going to your creditor.
Marilyn Lindblad practices law on the west coast of the United States. She has been a freelance writer since 2007. Her work has appeared on various websites. Lindblad received her Juris Doctor from Lewis and Clark Law School.