Can my wages be garnished by a creditor in another state?

North Carolina residents are fortunate to not have to routinely deal with wage garnishment. For most ordinary debts, such as credit cards, vehicle repossession deficiency balances, and private medical bills, North Carolina law does not permit wage garnishment as a means to collect the debt.

However, North Carolinians sometimes find themselves having their wages garnished on order of another state's courts. This is a special situation, usually as a result of two factors combining:

1. A valid judgment against the debtor in the other state.
2. An employer with an office in that state that will comply with the garnishment order.

Most frequently, the valid judgment arose when the debtor lived in that state prior to moving to North Carolina. Other times, there might have been some particular business dealings within the state. If an out-of-state judgment can be obtained is ultimately a question of personal jurisdiction of that court over the debtor. Each state has statutes specifying under what conditions must be present for that state's courts to exercise personal jurisdiction. These are a combination of contacts between the defendant and the state combined with valid service of process. Federal constitutional due process requirements are the outer bound of jurisdictional reach.

Similar jurisdictional concerns come into play when it comes to ordering the employer to withhold the garnishment. The most common case is where the employer has offices in the judgment state, where the employer will be subjected to the garnishment order.

Unfortunately for the North Carolina resident debtor, if the above facts have come together, he or she can find himself or herself subject to a legal wage garnishment. In most cases, North Carolina judgment collection rules don't prevent this result.

The automatic stay created by filing bankruptcy requires creditors to stop wage garnishments. Bankruptcy filed in North Carolina is effective to stop wage garnishment order by the courts of another state. In some cases, it may be possible to get back wages garnished in the 90 days prior to the bankruptcy being filed.