When a creditor takes a borrower to court because of an unpaid debt, the creditor may seek what’s known as a garnishment. A garnishment gives the creditor the right to withhold a portion of the debtor’s wages from their employer or assets from their bank account until the amount of the debt is recouped. However, before granting that garnishment, the courts will usually require the creditor to prove they have a garnishment bond, which is a type of surety bond. This article outlines 7 things you need to know:
1 – What is a Garnishment Bond?
If a judge allows a creditor (the plaintiff in a civil case) to garnish a debtor (the defendant in the civil case) and then later rules in the debtor’s favor, the plaintiff must release whatever assets they have garnished and pay for any damages caused because of the garnishment. If the creditor refuses to meet those obligations, the debtor may file a claim against the garnishment bond seeking compensation. As long as the claim is valid, the debtor is guaranteed payment and the creditor must take financial responsibility.
2 – How Does a Garnishment Bond Work?
- Principal – This is the bond holder, which in the case of garnishment bonds means the creditor seeking the garnishment. The principal must pay to secure the surety bond, follow the mandates of the surety bond, and settle any claims filed against the surety bond.
- Obligee – This is the bond beneficiary, or the debtor/defendant in the civil case. If a judge rules in favor of the obligee, that person may file a claim seeking restitution and damages.
- Surety – This is the company that issues the garnishment bond. As part of the surety bond agreement, the surety steps in to settle claims when the principal cannot or will not settle them. However, that doesn’t cancel the principal’s debt – it simply means they have to pay the surety instead of the obligee. Settling with the surety means paying interest and fees on top of the full amount of the claim.
3 – Why Do You Need a Garnishment Bond?
Because the court requires it and will not permit a garnishment without proof of an active surety bond. As neutral parties that can’t favor either side, courts go out of their way to treat the plaintiff and defendant equivalently. The surety bond requirement helps to offset the burden of the garnishment. Courts are also aware that garnishments create financial difficulties for whoever they’re placed on, so they work hard to deny any unjustified garnishment from the start. Surety bonds discourage creditors from requesting garnishments that don’t have merit by holding them responsible if a judgement falls through. Simply put, you need a garnishment bond to keep the whole system fair.
4 – What Are the Requirements for a Garnishment Bond?
The requirements for garnishment bonds tend to be more relaxed than those for other kinds of surety bonds because the surety considered these low-risk bonds. Why? Because a court will rarely grant a garnishment without requiring the creditor to provide compelling proof of their right to garnish. Therefore, courts rarely overturn garnishments, which means that claims on these surety bonds are also rare – but not impossible.
5 – How Much Does a Garnishment Bond Cost?
When a court requires a surety bond it will also specify how large the bond must be – meaning the total amount the surety agrees to pay in claims – based on state law and the amount the creditor seeks to garnish. The cost to obtain the bond is a small percentage of the total surety bond amount. The exact percentage depends on a review of the applicant’s credit and financial standing. Applicants with a low credit score or negative credit history will pay higher costs, but bad credit won’t necessarily disqualify that person from obtaining a surety bond. If you think your own credit could be an issue, explore the bad credit surety bond program available only through Viking Bond Service.
6 – Who Needs a Garnishment Bond?
Generally, anyone who seeks to garnish wages, assets, or a bank account in advance of a judge’s ruling in a civil case. A judge will not allow a garnishment to move forward until the creditor can prove it has a surety bond that meets the specified requirements. Therefore, any party that needs a bond should seek one out immediately to avoid delaying the garnishment unnecessarily. With the nationwide network and abundant resources of Viking Bond Service, you can secure a surety bond in under 48 hours.
7 – How to Obtain a Garnishment Bond
You can only obtain a surety bond after undergoing a thorough application and evaluation process. That includes an application document with questions about your background, business dealings, and financial standing. You will also need to provide a copy of the court order outlining the surety bond requirements. If underwriters feel they need more information to estimate an applicant’s credit risk, they may request additional documentation. Those underwriters will then calculate a quote for the surety bond price based on the information you supply. After you pay the bond premium, the surety will supply a document for the court proving you’ve met the requirements outlined.
Viking Bond Service – All You Need for Garnishment Bonds
Bonding should be fast, easy, and accessible to all. That’s our philosophy here at Viking Bond Service, where we connect people in all 50 states with the surety bonds they need. Get yours by completing our online bond application – or get more information first. We have surety bond experts standing by to address your questions and concerns. Reach one at 1-888-278-7389 or by filling out the contact form on this page.