As a small business owner, every last dollar counts, and when a previous customer fails to satisfy an old debt, you may wonder to what extent you can go to recover the past due amount. Can you ask the courts to garnish the customer’s wages?
According to Nolo, you can seek repayment through wage garnishment. However, to do so, you must go through several steps before the courts will grant a garnishment. You must follow the appropriate procedures so that you do not unwittingly set yourself further behind.
When you can garnish wages in Ohio
First and foremost, it is important to note that a court or government agency will not garnish a debtor’s wages on your behalf simply because he or she fell behind on a credit card payment, medical bill or past-due invoice. Rather, you must file a collection lawsuit in court, win said the lawsuit and receive a judgment that states that the debtor owes you X amount of money. Without this judgment, no government agency will garnish wages on your behalf.
Ohio law does provide exceptions to this rule, however. For instance, you may not need a money judgment if the debts are the result of defaulted student loans, past-due income taxes or court-mandated child support or arrearages.
The amount of money you may garnish
Garnishing wages is rarely the quick fix to money troubles that small business owners imagine it to be. Federal and Ohio laws limit how much of a debtor’s income a creditor may garnish. Per state law, you may only garnish 25% of the debtor’s disposable earnings, or the difference between a debtor’s disposable earnings and 30 times the current federal minimum wage, whichever is greater. “Disposable earnings” refer to any money a person has leftover once the employer removes taxes and other obligatory deductions from his or her paycheck.
Wage garnishment can be a great way to recover unpaid invoices. However, be sure to familiarize yourself with the legal process to garnish wages so that you do not unwittingly forfeit your rights to do so.