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3 Things Everyone Should Know About Small Claims Court and Wage Garnishment

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In a Nutshell

Debt collection lawsuits for small amounts are usually brought in a special court, called the small claims court. The procedures are simple and costs kept to a minimum. Even though this is a simplified process, a judgment from a small claims court carries the same weight as a judgment from any other court.

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated November 2, 2021

This article will explain small claims judgments and how they are just as effective as a judgment from other courts. They should not be taken lightly since a small claims judgment may lead to wage garnishment or a bank levy. If you receive a summons for a lawsuit, don’t ignore it. You can defend the case and take advantage of more than a few good options to find relief from the debt. One option is bankruptcy. It can stop a wage garnishment or a bank levy and even eliminate the underlying debt once and for all. 

Small Claims Judgments 101

Generally, a small claims court is a forum different from the regular civil court in your county.  The procedures are simplified. Small claims are usually limited to certain types of cases for limited amounts of money. They typically include certain real property and personal property matters.

For example, in California, individuals can sue in small claims court for debts up to $10,000 and businesses can sue for up to $5,000. Cases go more quickly than in civil court. Also, the filing fee and court costs are cheaper than most other courts.

Even though procedures for a small claims case are more relaxed, a small claims judgment is no different than a judgment from any other court. A small claims judgment has the same effects and carries the same consequences.

Once a creditor gets a judgment, it’s a “judgment creditor” and things change. A judgment creditor has more powerful debt collection tools at its disposal than a debt collector without a judgment. It can now collect the amount of the judgment with wage garnishment. If you are a judgment debtor - someone who owes money on a court judgment - state or federal exemptions protect a part of your income from being garnished.  

If you are a judgment debtor, know that the original judgment remains on credit reports for 5-10 years. Some states even allow judgment creditors to renew certain types of judgments up to 20 years or longer.  

Never ignore a summons from any court. If you receive a summons from a small claims court, do not treat it lightly. DO NOT IGNORE IT! You can fight the lawsuit. There is something to gain by responding to a complaint from any court. You can get through this and find debt relief.

First, you must file a legal pleading called an "answer" with the court. If you don’t, the creditor will win by default and receive a (default) judgment. If you do file and answer, you’re able to raise any defenses to the lawsuit. Most courts, especially those for small claims, have answer forms available for you to respond to a lawsuit.

This can buy you some time to negotiate payment with the creditor, even if it is a collection agency. Once a lawsuit is filed, there is a new opportunity for both sides to negotiate a settlement. The court may even require both parties to try to reach a settlement agreement in the case. The fact that cases settle before going to trial is not unusual. Especially when the amount of money in dispute is not a huge sum. 

You can resolve a debt collection lawsuit with a debt settlement. You can make a payment plan with the creditor to pay off the amount of the debt or partially pay this amount in a lump-sum settlement. 

You and your creditor may agree that you repay less than the full amount you owe, as long as you repay most of this settlement amount quickly. Payment plans may not be on the table for a debt settlement since creditors have little incentive to risk another default. A significant lump sum payment might be necessary. 

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Wage Garnishment After a Small Claims Court Judgment

Once a creditor has a judgment against you, it can use different debt collection tools to collect a debt from a judgment debtor. First, it obtains a writ of execution that allows it to take your personal property or even any real estate that you own. This court order puts in force a judgment of possession. A writ of execution directs the county sheriff to begin the transfer of property as the result of the judgment entered against you. 

A wage garnishment is an example of a debt collection tool. Unlike creditors who haven’t gone to court, judgment creditors can get a court order to garnish wages or take money from a bank account. This is much more effective than a collection agency. A certain amount of your wages must be withheld by your employer. A garnishment order directs the garnishee, usually the payroll company or your employer’s HR department,  to take money from a paycheck or bank account.

Another post-judgment procedure for debt collection is a bank levy. This allows a creditor to take money from your bank account. In this situation, a bank is a garnishee. Judgment creditors can’t predict the amount of money in your bank account. A wage garnishment may ensure that they receive some portion of the original judgment for their efforts.

Like most creditors, judgment collectors from small claims courts must follow federal and local laws when collecting a debt from judgment creditors. Debt collectors such as a collection agency can’t harass you by making threats on the telephone, They must act in good faith which means they must act honestly about the existence of the debt and whether you legally owe the debt.

The power to garnish wages isn’t absolute, even when a creditor holds a judgment. Federal law also limits the amount of money that can be garnished from your paycheck. This amount can’t be more than 25% of your take-home pay or the amount by which your income exceeds 30 times the federal minimum wage, currently set to $7.25 an hour, whichever is less.

This limitation applies to garnishments for all types of debts. These include taxes, child support, and alimony. Also, income from social security cannot be garnished. You may be able to claim an exemption to prevent a judgment creditor from garnishing portions of your income. A wage garnishment claim of exemption is a form of wage protection that prevents a garnishing creditor from taking certain types of income or more than a certain amount of your wages. 

Bankruptcy Can Protect Your Income From Small Claims Court Garnishment

If your wages are being garnished because of a small claims court judgment, bankruptcy can help you manage the debt. Bankruptcy stops the garnishment of a bankruptcy debtor’s wages. Any garnishee, whether a debtor’s bank or a debtor’s employer, must stop garnishing any amount of money once it receives notice of the bankruptcy case.

Two types of bankruptcy are generally available. A Chapter 7 bankruptcy case will wipe out many of your debts, such as credit card debt and even judgments from small claims court. A Chapter 13 bankruptcy case will help you reorganize your debts. This is done through a debt payment plan over 3 to 5 years. Bankruptcy can clear most judgments from a small claims court. It will erase these debts permanently. 

You can get a free evaluation from a local attorney. This legal advice can help you determine if bankruptcy is your best option for responding to any type of garnishment. There are alternatives to bankruptcy.

Let’s Summarize...

Debt collection lawsuits for small amounts are usually brought in a special court, called the small claims court. The procedures are simple and costs kept to a minimum. Even though this is a simplified process, a judgment from a small claims court carries the same weight as a judgment from any other court. 

If you've had a judgment entered against you in any court, bankruptcy is one tool that can be used to get debt relief and start fresh. Filing either a Chapter 7 or Chapter 13 bankruptcy case will stop wage garnishment or bank levy.

There are also self-help options. Upsolve’s free web app can help you decide if bankruptcy is the right answer for you. Upsolve can also help you get valuable legal advice from a local attorney.

Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer


Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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