A creditor that holds a judgment against you cannot simply take money from you to pay off the judgment debt. Instead, the creditor must go back to court and ask for an enforcement order that allows it to collect the money in a court-authorized way. One such procedure is wage garnishment, whereby your employer withholds money from your paycheck and sends this directly to your creditor. Depending on where you live, the court can sanction a garnishment of other income, including lottery winnings.
The creditor can only take your income if the court says it can. This means the creditor must go to court, debt judgment in hand, and ask for a garnishment order. Generally, a private creditor who obtains a garnishment order can only take the income you receive from your employment. The amount is capped at 25 percent of your weekly earnings, or 30 times the minimum wage if lower. If you owe money to the state, you'll lose significantly more from your paycheck. In a few states, creditors can take other income, including lottery winnings.
Lottery Garnishment Limits
The garnishment of lottery winnings is regulated by state law. Of the states that permit lottery-income garnishment, most restrict the distribution to state agencies who wish to garnish winnings to pay off tax delinquency and past-due child support. Only a handful of states permit private creditors to garnish lottery winnings to pay off judgment debts and liens, such as credit card debts.
Prize Amounts Matter
Generally, only prizes over a certain dollar amount may be garnished. The base amount varies significantly, depending on where you live. South Dakota, for example, allows state agencies to garnish lottery winnings over $100, whereas state authorities in Georgia cannot touch winnings under $5,000, and private creditors cannot touch them at all.
A second type of garnishment, known as non-wage garnishment, allows the creditor to collect money directly from your bank account. While some sources of money -- Social Security, disability or veterans payments, for example -- are exempt, generally, the creditor can take everything in your account to pay the judgment debt. State laws may safeguard some of your money. New York, for example, does not let creditors seize at least the first $1,716 in your account. Subject to these rules, if your lottery winnings are mixed in with other monies in your bank account, they may be fair game.
A former real estate lawyer, Jayne Thompson writes about law, business and corporate communications, drawing on 17 years’ experience in the legal sector. She holds a Bachelor of Laws from the University of Birmingham and a Masters in International Law from the University of East London.