Credit Card Judgment Basics

• When a credit card company receives a judgment against you for credit card debt, the credit company's rights to collect on the judgment vary from state to state. Some states allow the card company to obtain liens on your personal property or home, while others allow creditors to garnish bank accounts or wages. No matter what the individual laws are concerning judgment collection in your state, the handling of your federal income tax return cannot be altered by state regulations.
  
  

Tax Refund Offsets

• Even though your federal income tax refund cannot be offset to cover a judgment obtained by credit card companies, it is not completely safe. Several government agencies possess the ability to intercept your federal refund to cover debts owed. The IRS may intercept your tax refund to cover taxes owed on past filings, to cover student loan debt when you default on your loan or to pay off back child support.
  
  

Bank Account Garnishment

• While a credit card company cannot touch your federal tax refund through the IRS, the company may be able to access the refund after the money merges with funds already present within your bank account. When your return is direct deposited into your bank account, a credit card company with a garnishment order on the account the refund is diverted into can garnish a portion of the funds within the account. Opting to receive your refund in the form of a paper check allows you to prevent refund garnishment within your bank account, provided that you cash the check and avoid depositing the funds.
  
  

State Taxes

• Always check with your state's revenue department to verify its laws regarding state income tax refund interception. Many states do not allow the offset of your state tax return for private debt judgments such as those issued to credit card companies, but some states, such as Michigan, will intercept your state return if the creditor files the proper paperwork.