The Credit Handbook

Debt Collection

Debt Collectors

Knowing your rights can help you deal with collection agencies. If you owe money to a business, the business may try to collect the money itself, or the business may hire a collection agency. Either way, you have the right not to be harassed or abused. But your rights differ depending upon who is collecting the debt. You have more rights if an outside collection agency has been hired.

The federal Fair Debt Collection Practices Act and state laws govern the practices of debt collectors. These laws give you protections and set the following rules for collectors:

Within five days of the collector’s first call or letter to you, the collector must send you written notice. This notice details the amount of your debt, the name of the company you owe, and that the agency will assume the information they have is correct unless you disagree within 30 days.

If you disagree with the collection agency, you must send the agency a letter within 30 days. If you send a letter, the agency must stop trying to collect the debt until it sends you proof that you owe the debt.

You have the right to stop all collection attempts, at home and at work. Inform the collection agency in writing that you no longer wish to be contacted. Once you do that, the agency can only contact you to tell you that it is discontinuing its collection efforts, or that it is going to take some other action, such as suing you, to recover the debt.

If you are the victim of illegal collection agency tactics, you can sue the collection agency to recover actual damages plus punitive damages. You may also recover attorney’s fees if you are successful in your suit against the collection agency.

The Minnesota Department of Commerce licenses and regulates collection agencies in the state of Minnesota. If you are interested in information on a collection agency or want to make a complaint against one, you may contact the Minnesota Department of Commerce as follows:

Minnesota Department of Commerce
85 7th Place East, Suite 280
St. Paul, MN 55101
(651) 539-1600 (local)
(800) 657-3602 (Greater MN only) external link icon

Answering a Lawsuit

Start of a Lawsuit

To start a lawsuit against you, a person or company must serve a Summons and Complaint on you either: (a) by delivering it to you personally or leaving it at your home; or (b) by mail, if you agree in writing to accept “service” of the Summons and Complaint by mail and sign a form that so indicates. The person or company starting the lawsuit is known as the “plaintiff.” The person being sued is known as the “defendant.” The Summons informs you that you must provide a formal, written legal “answer” to the Complaint within 20 days after you receive the legal documents.

The Summons and Complaint served on you may not include a court file number. They are, however, the legal documents that begin the lawsuit. It is very important that you do not ignore the documents, or you will be in “default” and the plaintiff can automatically get a judgment against you. No court hearing is required for a default judgment to be entered against you if you do not properly respond to the Complaint.

You should promptly consult a lawyer if you receive a Summons and Complaint claiming you owe money. If you cannot identify an attorney to advise you, the Minnesota State Bar Association’s Attorney Referral Service is available on the Internet at: link icon

Answering a Complaint

The “Answer” is the formal legal name for your response to the Complaint. The Answer must meet certain requirements of the Minnesota Rules of Civil Procedure. Contacting the plaintiff or its attorney by telephone or written correspondence is not “answering” the Complaint. Though the plaintiff may encourage you to call if you have questions regarding a bill or dispute, doing so is not a formal Answer. Some court clerks have form Answers which may be of assistance to you. You must serve a copy of your Answer on the plaintiff’s attorney by mail, fax, or hand delivery, and complete an Affidavit of Service that explains who was served, how, and on what date. The Affidavit of Service form must be signed in front of a notary public or a court clerk. If you want a judge to hear the dispute, you should file the original Answer and Affidavit of Service with the court in the county in which you are being sued after you have served your Answer on the plaintiff’s attorney. You will be required to pay a court filing fee. (If you meet certain financial guidelines, however, you may not be required to pay the court filing fee. You may obtain more information regarding a waiver of the fee, called in forma pauperis, by contacting the court clerk.)

Failure to Answer

If you do not “answer” the Complaint, the Plaintiff may get a “default” judgment entered against you requiring you to pay money. By getting a default judgment, the plaintiff can then initiate a garnishment action against you. Garnishment is a way the Plaintiff can take money out of your bank account or paycheck in order to collect the money you owe pursuant to the default judgment.

Motion to Vacate

If judgment is already entered by the time you “answer,” you may be able to request that the judgment be “vacated” or canceled. You must make the request to the court in which the judgment was ordered. The most common reasons for requesting that a judgment be vacated are if you believe the judgment was entered due to: (1) mistake, inadvertence, surprise, or excusable neglect; or (2) fraud, misrepresentation, or other misconduct of an adverse party. Examples may include that you thought you “answered” by phone call or letter or you were not properly served with a Summons and Complaint. Other reasons to “vacate” exist, but you may wish to consult with an attorney to pursue those options. In any event, if you decide to request that a judgment be vacated, you should do so as soon as possible after you become aware of the judgment. You may want to contact the clerk of court to ask whether the clerk has a form for you to make your request.


Garnishment is a process a creditor may use to recover money you owe by collecting it from a third party such as your employer or your bank. If a creditor attempts to garnish your wages or bank account, it is helpful to know how the garnishment process works and which assets are exempt.

When Can Garnishment Take Place?

Garnishment can only take place after a civil lawsuit has been brought against you. A lawsuit is brought when the plaintiff—the person to whom you owe money—serves a copy of a Complaint on you. The plaintiff’s Complaint is his or her claim that you owe money.

Typically, garnishment occurs after the plaintiff in the lawsuit wins a court judgment against you requiring you to pay some amount of money. By winning a judgment, the plaintiff becomes a “judgment creditor,” and can then initiate a separate garnishment lawsuit against you.

However, garnishment can also take place before the plaintiff has won a court judgment against you. Garnishment can occur before judgment if you do not respond to (“Answer”) the plaintiff’s Complaint within 20 days after it was served on you. This means it is very important that you not ignore legal documents you receive. If you do not respond to the plaintiff’s lawsuit, then you are considered to be in “default.” If you are in default, the plaintiff only needs to wait another 20 days (for a total of 40 days from the time the lawsuit was started) before garnishing the amount he or she says you owe. Because of this, you should promptly consult a lawyer if you receive a legal document called a Complaint claiming you owe money.

Finally, in rare circumstances, garnishment can take place before judgment if it appears that you intend to delay or defraud your creditors by removing, converting, or selling your property to avoid paying the debt. The creditor in this instance must obtain a “prejudgment garnishment order,” typically after a court hearing on the matter.

How Is Garnishment Started?

To begin garnishment, a creditor sends a “garnishment summons” to the “garnishee”—typically your employer or bank—and a worksheet for the garnishee to list and report your earnings or assets. The garnishment summons will include your name, address, the amount of money you owe, and the date of the court judgment against you or the date you were in default.

If the creditor is garnishing your wages, it must serve you with a "Garnishment Exemption Notice and Notice of Intent to Garnish Earnings" ten days before serving garnishment papers on your employer.  If the creditor is garnishing your bank account, it can surprise you by serving you copies of garnishment paperwork within five days after it serves them on your bank.

How Can I Claim My Money Is Exempt from Garnishment?

You have the right to claim that certain earnings or assets are “exempt” from garnishment (your creditor cannot take them) by completing a “garnishment exemption notice.” The following is a description of exempt wages and funds.

Exempt Wages
Generally, creditors cannot garnish more than 25 percent of your net wages, or any of your net wages if they are less than $290 per week. If you have received public assistance based on need, then creditors cannot take any of your wages for six months after you received the assistance, if you timely fill out the proper paperwork. To claim that wages cannot be taken (i.e., are “exempt”), you must promptly return to the creditor’s attorney the “Debtor’s Exemption Notice” that came with the “Garnishment Exemption Notice and Notice of Intent to Garnish Earnings.” Calling the creditor is not sufficient. If the creditor’s attorney does not receive this exemption notice within 10 days, the creditor can seek to garnish your wages. If the creditor does not agree that your wages are exempt, it can still seek to garnish your wages, and you will have to ask the court to find your wages cannot be taken.

Exempt Bank Funds
If the creditor is trying to take money from your bank account, the bank will “freeze” money in your account to pay off your debt to the creditor. You will not receive notice of the bank garnishment until after your funds are already frozen. You will not have access to your funds while they are frozen. Your checks may “bounce,” and you may incur overdraft charges during this time. You may want to contact your bank immediately.

If you received public assistance based on need, the creditor cannot garnish your account for 60 days, if you timely fill out the proper paperwork. To claim that funds in your bank account cannot be taken (i.e., are “exempt”) you must sign and return within 14 days to the bank (and the creditor’s attorney) the “Exemption Notice” sent to you and the last 60 days of statements for that bank account. Calling the creditor is not sufficient. You may want to include copies of documents (i.e., benefit letters, etc.) to show why your funds are exempt. If you don’t claim an exemption within 14 days from the date the bank mailed the exemption notice to you, the bank may turn over your frozen funds to the creditor.

If you do claim an exemption in a timely manner, the bank will “unfreeze” your funds and release them to you in seven days unless the creditor “objects” to your “exemption claim.” If the creditor objects, it must send you a written objection to your exemption claim, along with a form called “Creditor’s Notice of Objection and Notice of Hearing on Exemption Claim.” You must then attend the court hearing and show the judge why you believe your funds are exempt. You can ask the judge to order the creditor to pay you $100 if you believe the creditor did not have good cause to object to your exemption claim.

How Does Garnishment Work?

If you can’t claim that your wages or bank funds are exempt, the creditor can take your bank funds or a portion of your earnings in order to satisfy your debt. In wage garnishment, your employer will withhold a portion of each paycheck—typically 25 percent of your weekly net income—for all paydays that fall within 70 days after your employer received a garnishment summons from the creditor. You are entitled to be paid either 75 percent of your net (or disposable) wages or 40 times the federal minimum wage, whichever is more. (Net wages includes your regular pay, sick pay, and overtime, minus the withholdings required by law.)

Here’s how to calculate the amount of your paycheck protected from garnishment:

  1. Calculate your disposable earnings. Your disposable earnings include your regular pay, sick pay, and overtime, minus all deductions including federal and state taxes, social security taxes, and any other deductions required by law.
  2. Determine what portion of your earnings will be protected. If you earn only the federal minimum wage, all of your earnings are protected from garnishment. If you earn more, the protected amount may be calculated in one of two ways, whichever is higher:
    • Method One: 75 percent of your weekly disposable income, which is calculated as .75 x your weekly, after-taxes earnings.
    • Method Two: A week’s wages at the federal minimum hourly wage, which is figured by multiplying 40 hours by the current federal minimum wage per hour. The federal minimum wage for most Minnesota employees is $7.25 an hour. In the following examples, we will be using the federal minimum wage.
Here are a few examples of how this works:
  1. Your disposable income in a week is $180. None of this may be garnished because it is less than the minimum wage ($290).
  2. Your disposable income in a week is $320. This would leave $30 available to be garnished. You would have $80 available for garnishment using method one ($320 x .75 = $240 exemption, so $320 - $240 = $80 available for garnishment). Using method two you would only have $30 available for garnishment ($320 - $290 = $30). Remember that you get to use the number that is in your best interest, so only $30 can be garnished.
  3. Your disposable income in a week is $400. This would leave $100 available for garnishment under method one and $110  available for garnishment under method two. In this example, method two would be in your favor, making $100 available for garnishment.

Once the appropriate amount has been calculated and withheld by your employer or bank, your creditor typically obtains a “writ of execution” (for a fee chargeable to you). A writ of execution is a court order that authorizes your employer or bank to release your garnished wages or frozen bank assets to your creditor. One writ of execution can release garnished funds over a number of pay periods. Without a writ of execution, the creditor must obtain your written authorization to release the garnished money. You may refuse to authorize the release, or you may agree to it in order to avoid paying the fee for a writ of execution.

Can I Be Fired for Being Garnished?

State law prohibits an employer from firing a debtor because of garnishments, regardless of the number of times they occur.

How Can I Avoid Garnishment?

The best way to avoid garnishment is by paying your bills on time. Do not ignore letters from collection agencies, even if you dispute a debt. If you are unable to pay on time, contact your creditors right away to work out a revised or reduced payment schedule. They might be willing to accept a payment plan, or even willing to settle for a lesser amount. If you reach a settlement, be sure to get it in writing and signed by both parties. While creditors are not obligated to agree to such a schedule, they may be willing to work with you, since collection and garnishment efforts can be costly. If you are sued over a debt you did not pay, be sure to take steps quickly to defend the lawsuit by initially answering the creditor’s Complaint against you. Consider seeking help from an attorney in these circumstances.

Vehicle Repossession

Most automobile financing agreements allow a creditor to repossess your car any time you’re in default. No notice is required. Your car can be repossessed when you’re just one day late in making a payment.

If a creditor threatens repossession, try to negotiate with the creditor. Repossession is an expensive option, so the creditor may be willing to work out a payment plan with you. You may also want to talk to an attorney. Or, you may want to consider turning the vehicle over to the creditor. This might save you money in the long run. The creditor will have fewer costs, because less will be spent getting the car back (either way, the creditor will probably try to pass these costs on to you). The creditor will also be able to re-sell the vehicle more quickly.

When you refuse to give up the vehicle, the creditor may take you to court to try to get it back. If you lose in court, the legal costs may be passed on to you.

If your car is repossessed, you will probably have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. If you can’t do this, the creditor may sell the car. The creditor must conduct a sale designed to get a fair price for the car. If the creditor gets less for the car than you owe on it, you may be asked to pay the difference. The creditor may sue you to recover the difference.

Creditors who are pursuing repossession do have to follow a few rules. For example, the car may be towed from in front of your house, but the creditor may not break into your garage to get your car. Also, if a creditor loaned you money to buy a car, then the creditor can only repossess the car. The creditor cannot keep other items that might be in the car when it is repossessed.

Other property that you are paying for over time can also be repossessed if you miss payments or only make partial payments. The creditor’s right to repossess an item will depend on what your contract says. If you have filed bankruptcy and are within the “automatic stay,” the creditor cannot repossess anything without permission from the bankruptcy court.