If you’ve been hurt in an accident and won a personal injury settlement, that compensation is meant to help you recover, to cover medical treatment, replace lost income, and give you some financial stability when life feels turned upside down.
However, many Texans already struggle financially when an accident happens, which adds to the pressure. A recent study by LendingTree found that Austin, San Antonio, and Houston rank as the top three largest cities in the US for highest average non-mortgage debt, with residents carrying $45,920, $44,812, and $44,640 on average, respectively. These debts, which include auto loans, credit cards, student loans, and personal loans, are significantly above the national average of $37,827.
With debt levels this high, it’s no surprise that many accident victims wonder: Can a personal injury settlement be garnished in Texas?
The answer is complicated. While Texas law protects most injury settlements from ordinary creditors, some debts can still take a bite out of your payout. Here’s what you need to know, and how to keep as much of your settlement as possible.
What Does Garnishment Mean?
Garnishment is when a creditor or government agency collects a debt by taking money directly from your wages, bank account, or other assets. Typically, this requires a court order and happens only after a creditor wins a judgment against you.
In Texas, garnishment is treated differently than in many other states. Wage garnishment for things like credit cards or personal loans is generally off-limits. But garnishment can still happen for:
- Back child support
- Federal student loans
- Unpaid federal, state, or local taxes
- Certain court fines and judgments.
Regarding a personal injury settlement, garnishment usually doesn’t involve your paycheck. Instead, creditors and agencies use liens, legal claims on your settlement funds. Those liens must be paid before you receive your portion.
Are Personal Injury Settlements Protected?
For most debts, yes. Texas law treats personal injury settlements as compensation, not income. This money is meant to make you whole after someone else’s negligence, not as extra income you can freely spend. That protection keeps most creditors, such as those holding credit card or auto loan balances, from touching your settlement.
However, that protection has limits. If you owe money to the government, have unpaid child support, or received medical treatment you haven’t paid for, part of your settlement can still be taken before it reaches you.
When Can a Personal Injury Settlement Be Garnished in Texas?
Liens or garnishments can reduce a settlement in three main situations. Let’s break them down.
Child Support Arrears
Child support is a top priority under Texas law. If you’re behind on payments, the state can place a lien on your personal injury settlement under Section 157.317 of the Texas Family Code. This lien attaches to your net settlement, after legal fees and medical costs, and those overdue payments must be resolved before you receive the rest.
These liens are difficult to negotiate down because Texas prioritizes ensuring support obligations are met.
Government Debts
The IRS and other agencies can also collect from your settlement. If you owe unpaid federal taxes, defaulted federal student loans, or state and local tax debts, those balances can be taken out of your recovery.
Common government debts that can affect your settlement include:
- Federal income taxes: The IRS has strong collection powers and can seize settlement funds for unpaid taxes.
- State and local taxes: Texas tax authorities and even local governments can claim a portion of your payout for outstanding tax bills.
- Federal student loans: If you’ve defaulted on a federal student loan, those funds can be collected from your settlement proceeds.
- Court fines and penalties: Criminal fines or civil penalties owed to government agencies can also be deducted before you receive your share.
While some debts can be negotiated, such as through IRS repayment plans or offers in compromise, they usually must be resolved before your settlement is paid out.
Medical Liens
Medical bills are one of the most common reasons a settlement gets reduced. Under Texas law, hospitals, doctors, and other providers who treated you after your accident can file a lien to ensure they’re paid for their services.
Government programs like Medicare and Medicaid can also place liens to recover benefits they covered for your injury. Medicare has broad rights under the Medicare Secondary Payer Act, while Medicaid’s rights are limited (thanks to the Ahiborn decision) to only the medical portion of your settlement.
Related Reading: Evidence for Personal Injury Claims
What About Other Judgments?
If you owe money from a court judgment, such as damages from another lawsuit or divorce obligations, those creditors may also try to collect through a lien or by garnishing your bank account. While Texas shields your wages from most creditors, your settlement funds can still be vulnerable.
How the Process Works
If you hire an attorney for your personal injury claim, part of their job is to handle these issues for you. Here’s how the process typically goes:
- Identify Liens: Your lawyer checks for any outstanding claims from child support agencies, government entities, hospitals, or insurers.
- Verifying Amounts: They request itemized balances so you know exactly what’s owed.
- Negotiating Reductions: Many lienholders, especially medical providers, will agree to lower their claim so you keep more of your settlement
- Paying Liens: Once your case is resolved, the settlement funds go to your lawyer’s trust account. Liens are paid, attorney fees and expenses are deducted, and you receive the remaining balance.
This process can be complex, so having legal guidance matters, especially if you have multiple debts.
How to Protect Your Personal Injury Settlement
You can’t avoid every lien, but you can take steps to protect as much of your settlement as possible:
- Be honest about your debts. Tell your lawyer about any back child support, tax debts, judgments, or medical bills. They can plan ahead to minimize the impact.
- Keep your settlement separate. Deposit your settlement in a different account so it’s not confused with wages or other income if creditors come looking.
- Negotiate wherever possible. Medical providers and insurers often accept reduced payments. Even the IRS sometimes agrees to structured plans or compromises.
- Challenge incorrect amounts. If a lienholder claims more than you owe, your attorney can contest it and make sure only valid balances are paid.
- Consider structured payments. In some cases, arranging your settlement as periodic payments can make liens easier to handle and protect your financial stability.
Examples of Garnishment in Action
Here’s how these rules might play out in real life:
- You settle a car accident claim for $100,000, but owe $20,000 in unpaid child support. The Texas Attorney General places a lien, and that balance is deducted before you receive your share.
- You owe $10,000 in back taxes to the IRS. The IRS can garnish your settlement or file a lien to take what’s owed, sometimes even before the check is cut.
- You received $15,000 in hospital treatment after your accident. The hospital filed a lien, but your lawyer negotiated it down to $10,000 so you keep more of your compensation.
Related Reading: How Long Does It Take to Get a Settlement Check after an Accident?
Can Liens or Garnishments Be Reduced?
In many cases, yes. Child support debts are rarely negotiable, but medical liens and even some government debts can often be reduced. Medicaid can only take a portion of your settlement tied to medical costs, and the IRS may accept repayment plans or lower lump-sum payments if taking everything would create extreme hardship.
Your lawyer can also ensure you’re not overpaying, challenge inaccurate balances, and resist lienholders’ demands for more than they’re legally allowed to take.
Why It Pays to Have a Lawyer
A personal injury lawyer doesn’t just fight for your settlement. They help protect it. At Patino Law Firm, we:
- Identify and verify all liens early, so there are no surprises.
- Negotiate reductions to keep more money in your pocket.
- Dispute inflated or invalid claims
- Coordinate with child support agencies, the IRS, and medical providers to make sure everything is handled legally and fairly.
- Advise you on structured settlement or other ways to safeguard your recovery.
So, can a personal injury settlement be garnished in Texas? Yes, but only for specific debts. Child support, government debts, and medical liens can all reduce your payout. However, credit card companies, personal loan lenders, and most other creditors, cannot touch your settlement.
The good news is that with the right legal strategy, you can often limit how much is taken and ensure you keep as much of your compensation as possible.
If you’re facing a personal injury claim and worried about debts, liens, or garnishments, Patino Law Firm can help. We’ll guide you through the process, fight for your rights, and work to protect the settlement you need to move forward. Contact us today to get started.
