Wage Garnishment in Vermont: What the Law Says and What Bankruptcy Changes

How much of your pay can be garnished in Vermont?

For an ordinary money judgment, Vermont law describes what is exempt, not what a creditor may take. Under 12 V.S.A. § 3170(b), your exempt earnings are 75 percent of your weekly disposable earnings or 30 times the federal minimum hourly wage, whichever is greater. If the judgment debt arose from a consumer credit transaction, the exempt share is 85 percent of weekly disposable earnings or 40 times the federal minimum hourly wage, whichever is greater. The court may order a greater exempt amount if it finds your reasonable weekly maintenance expenses, and those of your dependents, exceed those amounts. A waiver of these protections is void, and V.R.C.P. 4.2(j)(2) states the same limits. Federal law adds a separate ceiling of 25 percent of disposable earnings, or the amount above 30 times the federal minimum wage, whichever is less, with exceptions for support orders, orders of a United States court with chapter 13 jurisdiction, and state or federal tax debts (15 U.S.C. § 1673).

What counts as earnings and disposable earnings?

Both Vermont and federal law turn on two defined terms. In the Vermont sections governing trustee process against earnings, earnings means compensation paid or payable for personal services, wages, salary, commission, bonus, or otherwise, and includes periodic payments under a pension or retirement program, and proceeds from the sale of milk for an individual engaged in dairy farming (12 V.S.A. § 3169). Disposable earnings means what is left after deducting amounts required by law to be withheld. That matters because the exempt share is measured against disposable earnings, not gross pay. V.R.C.P. 4.2(j)(5) uses the same definitions and adds that earnings do not include payments from sources that by law are exempt from attachment. Federal law defines the same two terms and defines garnishment as any legal or equitable procedure through which earnings are withheld for payment of any debt (15 U.S.C. § 1672). Periodic pension or retirement payments fall within that definition of earnings.

What do Vermont statutes require of creditors and courts?

Trustee process against earnings may not be used to enforce a money judgment in a civil action until the judgment becomes final, and then only under the sections that follow (12 V.S.A. § 3167). The judgment creditor must move the court that rendered the judgment, describing in detail the grounds, the amount of the judgment alleged to be unpaid, and the source of your earnings (12 V.S.A. § 3168). Notice goes to the trustee, the party who holds or owes your earnings, and to you, and the court holds a hearing on the motion. At the hearing the court decides whether you have neglected or refused to pay or make reasonable arrangements to pay; if it so finds, it must also determine the unpaid amount, your weekly disposable earnings, whether you have received public assistance, and your reasonable weekly maintenance expenses (12 V.S.A. § 3169). The order states where withheld amounts are to be delivered and carries statutory warnings to the employer (12 V.S.A. § 3171).

Which income is protected from garnishment under Vermont law?

Several Vermont statutes put particular income outside this process, each on its own terms. Unemployment benefits are not assignable before payment and, once awarded, adjudged, or paid, are exempt from claims of creditors and from levy, execution, attachment, and trustee process; that exemption may not be waived (21 V.S.A. § 1367). Workers' compensation and claims for compensation are exempt from all claims of creditors except as provided in section 682 of that chapter (21 V.S.A. § 681). Amounts held in or withdrawn from a Vermont Higher Education Investment Plan account are not subject to attachment, garnishment, levy, seizure, or creditor claims (16 V.S.A. § 2879d). Only the rights or interests an alternate payee acquires pursuant to these particular sections are not subject to execution, garnishment, attachment, or other process (3 V.S.A. § 476a(h); 24 V.S.A. § 5066a(h)). The broader exemption list in 12 V.S.A. § 2740 covers goods and certain accounts, each with its own conditions, and it is not a blanket shield for wages deposited in a bank account.

Which statutory protections may matter when contesting a Vermont garnishment?

No order approving trustee process against earnings may be entered against a judgment debtor who, within the two-month period preceding the hearing, received assistance from the Vermont Department for Children and Families or the Department of Vermont Health Access, and the debtor must establish that exemption at the time of hearing (12 V.S.A. § 3170(a)). Under V.R.C.P. 4.2(j)(3), the judgment creditor's attorney serves the motion, summons, disclosure form, and list of exemptions on the trustee and on any judgment debtor against whom judgment was issued by default, service completed at least 14 days before the hearing. The trustee must appear at the hearing, or serve a disclosure under oath at least 5 days before it. Those are service and disclosure deadlines, not objection deadlines for you. The order may provide for repetitive withholding and may, upon motion, be modified; any waiver of the exempt shares in 12 V.S.A. § 3170(b) is void.

Which Vermont collection mechanisms follow different rules?

Not every paycheck deduction follows those sections. Withholding to secure child or spousal support is conducted only under the Vermont Rules for Family Proceedings, not the civil trustee process rule (V.R.C.P. 4.2). State taxes run administratively: the Commissioner of Taxes may garnish earnings subject to the exemptions in 12 V.S.A. § 3170(a) and (b)(1) (32 V.S.A. § 3208(a)). At least 30 days before initiating wage garnishment, the Commissioner must demand payment and notify the taxpayer, by first-class mail to the last known address, that the taxpayer is subject to garnishment (32 V.S.A. § 3208(c)). A notice of garnishment then goes by certified mail; the taxpayer may petition the Commissioner in writing for a hearing within 15 days of that mailing (32 V.S.A. § 3208(d)). Municipal taxes differ: after a judicial hearing, a municipality may deduct from a delinquent employee-taxpayer's weekly disposable earnings the lesser of 20 percent or the amount above 30 times the federal minimum hourly wage (32 V.S.A. § 5141).

How does filing bankruptcy affect a Vermont garnishment?

A voluntary bankruptcy case begins when the petition is filed, and that filing itself constitutes the order for relief (11 U.S.C. § 301). Filing generally operates as a stay, applicable to all entities, of the commencement or continuation of an action against the debtor on a pre-bankruptcy claim, of the enforcement of a judgment obtained before the case began, and of acts to collect such a claim (11 U.S.C. § 362(a)). That stay arises from the filing; no separate court order creates it, though notice to the court, the employer, and the creditor can matter operationally. It is not unlimited. Withholding of income for payment of a domestic support obligation under a judicial or administrative order or a statute is among the listed exceptions, a party in interest can ask the court for relief from the stay after notice and a hearing, and prior dismissed cases can shorten or prevent it (11 U.S.C. § 362).

What should you ask a lawyer about a Vermont garnishment?

This page describes what Vermont statutes and rules say. It cannot tell you what a court will do with your facts, and nothing here is a review of your situation. If a motion for trustee process against your earnings has been served, or money is already coming out of your pay, a few specific questions are worth taking to a lawyer or to legal aid. Did the judgment debt arise from a consumer credit transaction, which changes the exempt share? Did you receive assistance from the Vermont Department for Children and Families or the Department of Vermont Health Access within the two months before the hearing, and what would establish that at the hearing? Do your reasonable weekly maintenance expenses support asking for a greater exempt amount? Is the deduction ordinary judgment collection, support withholding, or a tax collection, and if it comes from a federal agency, which authority governs it, since these Vermont sections do not supply it?

Frequently asked questions

Does filing bankruptcy stop a Vermont wage garnishment?

Filing a petition generally operates as a stay of the enforcement of a pre-bankruptcy judgment and of acts to collect a pre-bankruptcy claim, which commonly reaches ordinary wage garnishment (11 U.S.C. § 362(a)). It is not absolute: withholding of income for a domestic support obligation under an order or statute is excepted, a creditor can seek relief from the stay after notice and a hearing, and prior dismissed cases can shorten or prevent the stay.

What happens to the stay if one earlier case of mine was dismissed in the past year?

This covers a single or joint case filed by or against an individual under chapter 7, 11, or 13 where a case of that debtor was pending within the preceding 1-year period but was dismissed, except a case refiled under a chapter other than chapter 7 after a section 707(b) dismissal. The stay then terminates with respect to the debtor on the 30th day after the later filing, "with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease." On motion of a party in interest, after notice and a hearing completed before that 30-day period ends, the court may extend the stay as to any or all creditors, only if that party demonstrates the later filing is in good faith as to the creditors to be stayed (11 U.S.C. § 362(c)(3)).

What if two or more of my cases were dismissed in the past year?

That is a different rule. If a single or joint case is filed by or against an individual under this title, and 2 or more cases of that debtor were pending within the previous year but were dismissed, except a case refiled under a chapter other than chapter 7 after a section 707(b) dismissal, the stay does not go into effect upon the later filing. Within 30 days after that filing a party in interest may request a stay, and after notice and a hearing the court may order one as to any or all creditors, only if that party demonstrates the later filing is in good faith as to the creditors to be stayed. An imposed stay takes effect when the order is entered (11 U.S.C. § 362(c)(4)).

Can my employer fire me because of a Vermont garnishment?

No employee may be discharged from employment on account of trustee process issued to an employer against earnings, and a discharge within 60 days of service of a trustee process summons on the employer is rebuttably presumed to be on that account (12 V.S.A. § 3172). An employee discharged in violation may sue in Superior Court for reinstatement, back wages, and damages; a prevailing employee is awarded costs, and attorney's fees are discretionary. Federal law separately bars discharge for garnishment for any one indebtedness (15 U.S.C. § 1674).

Can a Vermont small claims judgment be collected from wages right away?

Under the small claims rules, trustee process against earnings is available only if the judgment is unpaid after the 30-day period in Rule 10(a)(1) and no appeal is pending (V.R.S.C.P. 9). That period runs from entry of judgment where the defendant appeared, and from service of the judgment where it was issued by default; the judgment is stayed during it and, if an appeal is filed, until the appeal is decided (V.R.S.C.P. 10). That stay is a state appeal stay, not the bankruptcy stay.

Can a Vermont filer use the federal exemption list in bankruptcy?

Vermont has not opted out, so where Vermont law applies a filer may elect the federal list in 11 U.S.C. § 522(d). Domicile, not current residence, controls: under § 522(b)(3)(A) the applicable law is that of the place where the debtor's domicile was located for the 730 days immediately preceding filing, or, if not a single State for that period, the place of domicile for the 180 days immediately preceding those 730 days, or for a longer portion of that 180-day period than in any other place. Section 522(b)(3) is not only a state list: it reaches property exempt under state or local law or under federal law other than § 522(d), plus retirement funds in a fund or account exempt from taxation under the Internal Revenue Code sections it lists, which does not reach every retirement account. If that domiciliary requirement leaves a debtor ineligible for any exemption, § 522(d) may be elected (11 U.S.C. § 522).

Sources

• 12 V.S.A. § 3167
• 12 V.S.A. § 3168
• 12 V.S.A. § 3169
• 12 V.S.A. § 3170
• 12 V.S.A. § 3171
• 12 V.S.A. § 3172
• 12 V.S.A. § 2740
• V.R.C.P. 4.2
• V.R.S.C.P. 9
• V.R.S.C.P. 10
• 21 V.S.A. § 1367
• 21 V.S.A. § 681
• 16 V.S.A. § 2879d
• 3 V.S.A. § 476a(h)
• 24 V.S.A. § 5066a(h)
• 32 V.S.A. § 3208
• 32 V.S.A. § 5141
• 11 U.S.C. § 301
• 11 U.S.C. § 362 · official source
• 11 U.S.C. § 522 · official source
• 11 U.S.C. § 522(b)(2) · official source
• 15 U.S.C. § 1672
• 15 U.S.C. § 1673
• 15 U.S.C. § 1674
• 15 U.S.C. § 1677

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