QUESTION
Can my earnings from my corporation be garnished and why?
Asked on Jul 15th, 2015 on Bankruptcy - California
More details to this question:
I am self employed and own a 50% interest in a C corp. I have a judgment against me by a credit card company and I am making payments to a law firm on their behalf. Business is terrible so I am having a lot of problems paying them. We are manufacturer’s representatives and don't buy or resell anything. We only get a commission on products we sell and those funds are paid directly to our corporation. Can my earnings from this corporation be garnished?
6 ANSWERS
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Yes, since your creditor has a judgment, they can garnish your funds from whatever source that you get them. But it's tricky to garnish an owner of a small business because the owner can decide how and when to distribute any earnings. For example, if they get a wage garnishment order, you can stop paying yourself wages and make distributions.
Answered on Jul 20th, 2015 at 1:03 AM
Bankruptcy Attorney serving Madison, WI
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Richard B. Jacobson & Associates, LLC
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Yes. Not the earnings OF the corporation, but your earnings FROM the corporation. You might want to consult a lawyer or financial adviser who could make some suggestions about lawful ways to protect your assets from creditors.
Answered on Jul 16th, 2015 at 6:32 PM
Debt Collection Attorney serving Chicago, IL
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Edelman, Combs, Latturner & Goodwin, LLC
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Income you get from a corporation can be subject to a wage deduction, whether you own the corporation or not. Your interest in the corporation is also an asset that can be seized.
Answered on Jul 15th, 2015 at 5:22 PM
Yes your corporate distributions can be attached, and in many situations, the creditor can just seize the corporate shares to collect. State laws called exemptions limit garnishment from wages to 25% of the gross, but there is no protection under Nevada law for corporate distributions. See NRS 21.090 for the specifics.
Answered on Jul 15th, 2015 at 4:45 PM
If you have a judgment against you personally, any income or bank accounts in your name would be subject to garnishment up to the limits specified by state law. From what you have described, you are an employee of the C corporation and would have W-2 earnings. Those earnings would be subject to garnishment. The judgment creditor would not be able to reach into your corporation and take the commissions it receives, however, without taking further legal action against the corporation itself. You would not be able to stop paying yourself, however, just to avoid paying your judgment, or else the creditor could judicially "pierce the corporate veil" to get at the earnings that the corporation would normally have to pay you. If you are having difficulty making your payments, the direct approach with the creditor law firm may be the best way to get some relief.
Answered on Jul 15th, 2015 at 4:37 PM
If you are paid a salary or draw probably yes. They could also levy on your interest in the corporation as well as any payout of profits that would go to you.
Answered on Jul 15th, 2015 at 4:15 PM