What is garnishment?

What is garnishment?

• A. A method to increase savings
• B. A legal process for collecting a debt
• C. An insurance policy for loans
• D. A way to secure investments

Answer: (B)

Garnishment is a legal process that allows creditors to collect debts directly from a debtor's wages or bank accounts. When a debtor fails to pay a monetary obligation, a creditor can obtain a court order that authorizes them to take a portion of the debtor's earnings or funds held in a bank account to satisfy the debt. This process serves as a means for creditors to ensure they receive payment when other collection efforts have failed. For instance, if an individual has an outstanding credit card bill and fails to make payments, the credit card company can file for garnishment. If granted by the court, a portion of the individual's paycheck will be deducted automatically and sent to the creditor until the debt is settled. Other provided options, such as methods to increase savings, insurance policies for loans, and ways to secure investments, do not relate to the legal recovery of debts and therefore do not define garnishment accurately. Understanding garnishment is crucial, as it highlights the legal rights creditors have in managing unpaid debts and the impacts this can have on a debtor's financial situation.

Garnishment is a legal process that allows creditors to collect debts directly from a debtor's wages or bank accounts. When a debtor fails to pay a monetary obligation, a creditor can obtain a court order that authorizes them to take a portion of the debtor's earnings or funds held in a bank account to satisfy the debt. This process serves as a means for creditors to ensure they receive payment when other collection efforts have failed.

For instance, if an individual has an outstanding credit card bill and fails to make payments, the credit card company can file for garnishment. If granted by the court, a portion of the individual's paycheck will be deducted automatically and sent to the creditor until the debt is settled.

Other provided options, such as methods to increase savings, insurance policies for loans, and ways to secure investments, do not relate to the legal recovery of debts and therefore do not define garnishment accurately. Understanding garnishment is crucial, as it highlights the legal rights creditors have in managing unpaid debts and the impacts this can have on a debtor's financial situation.