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Business Debt: When an LLC owes an unpaid debt, and the creditor chooses to pursue legal action to recover it, the LLC is typically solely responsible for the debt -- the wages of its members are protected from garnishment. This means that a creditor to which the LLC is indebted may only seek recovery of amounts owed from the income of the LLC.
Personal Debt A personal debt is any borrowed amount that is not connected with a business -- it includes personal car loans, credit cards, installment loans and retail store cards. Because a personal debt is not connected with the finances of an LLC, a creditor may choose to pursue legal action against the individual to recover unpaid debts. These debts are not protected by the individual's status as a member of an LLC. This means that a creditor may garnish the wages of an LLC member to recover unpaid personal debts.
Before a creditor can garnish the wages of an LLC member for either personal debt or the debts of an LLC owned by a single member, the creditor must obtain a legal judgment against the debtor. The creditor must typically file a civil suit for a money contract with the civil court in the county where the debtor resides. State law provides the debtor with a period of time, usually around 30 days, to contest the suit. If the debtor does not successfully contest the suit, the creditor can obtain a default judgment, which grants the creditor certain legal rights of recovery, including the right to petition for the garnishment of wages.
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