Garnishing Wages and Bank Accounts: How Monetary Claim Execution Works in Japan

For creditors in Japan seeking to recover on a monetary judgment or other title of obligation, one of the most common avenues of enforcement is to target claims that the debtor holds against third parties. Prominent among these are bank account deposits and employment wages. This process, known as execution against monetary claims (kinsen saiken shikkō, 金銭債権執行), involves a distinct set of procedures and legal considerations, particularly concerning the identification of assets and the rights of all parties involved—the creditor, the debtor, and the third-party owing money to the debtor (the garnishee).

General Framework for Execution Against Monetary Claims

Before diving into the specifics of bank accounts and wages, it's essential to understand the general structure of executing against monetary claims in Japan:

• The Key Players:
  • Executing Creditor (差押債権者 - Sashiosae Saikensha): The party holding the title of obligation and seeking enforcement.
  • Debtor (債務者 - Saimusha): The party obligated under the title of obligation.
  • Third-Party Debtor (第三債務者 - Daisan Saimusha): The party who owes a monetary debt to the Debtor (e.g., a bank holding the Debtor's deposits, or an employer owing wages to the Debtor). This party is akin to a garnishee in other legal systems.
• Initiating the Process – The Petition:
  The creditor initiates the process by filing a petition with the competent execution court, which is typically the district court having jurisdiction over the Debtor's general forum (e.g., place of residence or business). The petition must, of course, be based on a valid title of obligation (e.g., a final judgment, a notarized deed with an execution clause) and, in most cases, an accompanying execution clause (shikkōbun) certifying its current enforceability. A critical part of the petition is the clear specification of the Third-Party Debtor and the particular monetary claim held by the Debtor against that Third-Party Debtor which the Creditor seeks to seize (this is often referred to as the "seized claim" or 被差押債権 - hi-sashiosae saiken).
• The Seizure Order (差押命令 - Sashiosae Meirei):
  If the court finds the petition and supporting documents to be in order, it issues a Seizure Order. This order has a dual effect:
  1. It prohibits the Debtor from collecting, assigning, or otherwise disposing of the seized claim.
  2. It prohibits the Third-Party Debtor from making payment of the seized claim to the Debtor.
     The Seizure Order must be served on both the Third-Party Debtor and the Debtor. Crucially, the seizure generally takes legal effect at the moment the order is served upon the Third-Party Debtor (Article 145, paragraph 4, Civil Execution Act). This timing is vital for determining priorities if multiple creditors are involved or if other transactions concerning the claim occur around the same time.

Focus 1: Garnishing Bank Accounts (Yokin Saiken no Sashiosae, 預金債権の差押え)

Bank accounts are a prime target for creditors, but specifying them for seizure can be challenging in Japan due to privacy considerations and the way financial institutions manage account information.

• The Challenge of Specification (Tokuteisei no Mondai, 特定性の問題):
  A major hurdle for creditors has been the level of specificity required to identify a debtor's bank account for a valid seizure. Simply naming the bank might not be enough if the debtor could have accounts at multiple branches.
• The "Store Allocation Method" (Tempo Waritsuke Hōshiki, 店舗割付方式):
  Traditionally, a common method was for the creditor to specify a particular branch of a bank where they believed the debtor held an account, and then request seizure of funds at that branch up to the claimed amount. This method, however, has limitations. If the debtor's funds are at a different branch, or insufficient at the specified branch, the seizure might be ineffective or only partially successful, allowing the debtor to withdraw funds from other, unspecified branches.
• Attempts at Broader Seizures and Supreme Court Clarifications:
  Creditors have attempted to use broader specifications to overcome these limitations, leading to important clarifications from the Supreme Court of Japan:
  • "All-Store Collective Ranking Method" (Zenten Ikkatsu Jun'izuke Hōshiki, 全店一括順位付け方式): This involved attempting to seize funds across all branches of a financial institution, often with a specified order of priority (e.g., by branch number). However, in a significant decision on September 20, 2011, the Supreme Court largely invalidated this approach for large, multi-branch financial institutions. The Court reasoned that requiring a bank to immediately identify and freeze potentially affected accounts across its entire network upon receiving such an order imposed an excessive operational burden and could lead to uncertainty and instability, especially concerning the precise moment the seizure takes effect at each potential branch. The bank's internal systems, while capable of "name-based searches" (nayose, 名寄せ) across all branches, might require considerable time (sometimes days or weeks for very large institutions) to accurately identify all relevant accounts without error, which is not compatible with the principle that seizure should be effective promptly upon service to the third-party debtor.
  • "Maximum Deposit Store Method" (Yokingaku Saidai Tempo Hōshiki, 預金額最大店舗方式): Another approach was to request seizure from the branch holding the debtor's largest deposit, without specifying the branch. The Supreme Court also cast doubt on the general permissibility of this method for similar reasons of identification burden and lack of immediate certainty (e.g., decision of January 17, 2013).
  • Seizure of Future Deposits (Shōrai Yokin no Sashiosae, 将来預金の差押え): Creditors also explored seizing not just existing balances but also funds that would be deposited into an account over a specified future period (e.g., for one year). In a decision on July 24, 2012, the Supreme Court ruled that such a seizure lacks the necessary specificity for ordinary bank deposit claims. The Court noted the uncertainty of future deposits (timing and amount) and the undue burden on the bank to continuously monitor and segregate incoming funds under existing banking systems, which are not designed for such real-time, ongoing segregation based on a seizure order.
• Current Practical Approach for Bank Account Seizure:
  Following these Supreme Court decisions, creditors generally need to specify the particular branch of the bank when seeking to seize a deposit account. Broad, speculative seizures targeting all branches of a large bank without further specification are unlikely to be permitted. This underscores the importance of pre-execution investigation by the creditor or the utility of asset disclosure mechanisms, however limited they may be in practice in Japan. Some lower court decisions and scholarly opinions suggest that a "limited branch ranking method" (限定的店舗順位付け方式 - genteiteki tempo jun'izuke hōshiki), where a small, manageable number of specified branches are targeted in a ranked order, might be permissible, but this is not a universally accepted practice.

Focus 2: Garnishing Wages and Similar Periodic Payments (Kyūryō tō no Sashiosae, 給料等の差押え)

Wages, salaries, bonuses, and retirement allowances are other common targets for monetary claim execution. Japanese law provides significant protections for debtors in this context to ensure they retain sufficient funds for their livelihood.

• Scope of Seizable Claims: This includes regular salary payments, bonuses, severance pay, and other forms of continuous income derived from an employment relationship.
• Statutory Limitations on Seizure Amount (Article 152, Civil Execution Act):
  • General Rule – The "One-Quarter Rule": As a general principle, only one-quarter (1/4) of the debtor's net earnings can be seized. "Net earnings" refers to the amount remaining after deducting statutorily mandated items like income tax, resident tax, and social insurance premiums.
  • Minimum Protected Amount – The "JPY 330,000 Rule": There's a floor designed to ensure a minimum living standard. If the remaining three-quarters (3/4) of the debtor's net monthly earnings exceeds an amount set by cabinet order (currently JPY 330,000), the portion of that three-quarters which exceeds JPY 330,000 can also be seized. Put differently, the debtor is generally guaranteed to retain at least JPY 330,000 of their net monthly income if their total net income is JPY 440,000 or more. If their net income is less than JPY 440,000, they retain three-quarters of it.
  • Special Rules for Support Obligations (扶養義務等に係る定期金債権 - Fuyō Gimu tō ni kakaru Teikikin Saiken): When the claim being enforced is for family support obligations, such as child support or alimony, the seizable portion of wages is increased. Up to one-half (1/2) of the net earnings can be seized for these types of claims (Article 152, paragraph 3). This reflects a policy prioritizing the financial needs of dependents.
• Continuing Effect of Wage Seizure (Article 151, Civil Execution Act):
  Once a Seizure Order for wages is served on the employer (the Third-Party Debtor), it generally has a continuing effect. This means it applies not only to the wages due at the time of service but also to all future wage payments from that same employer until the creditor's claim (including interest and execution costs) is fully satisfied. This avoids the need for the creditor to file repeated seizure applications each payday.
• Effect of Change in Employment:
  If the Debtor leaves their employment with the Third-Party Debtor upon whom the Seizure Order was served, the order ceases to be effective for wages from a new employer. The creditor would need to identify the new employer and obtain a new Seizure Order directed to them. If a debtor resigns and is then re-hired by the same employer, a Supreme Court decision (January 18, 1980) suggests that if the resignation and re-hiring were genuine and not a sham to evade execution, the original seizure order would not automatically apply to wages under the new employment contract.

Key Procedural Steps After Seizure

Regardless of whether the target is a bank account or wages, certain procedures follow the issuance and service of the Seizure Order:

• Demand for Statement from Third-Party Debtor (Chinjutsu Saikoku, 陳述催告 - Article 147, Civil Execution Act):
  The executing creditor can (and almost always does) request the court, at the time of applying for the Seizure Order, to issue a "Demand for Statement" to the Third-Party Debtor. This requires the Third-Party Debtor to report to the court within two weeks of receiving the Seizure Order, stating whether the seized claim exists, its amount, whether there are any prior seizures or assignments affecting it, and whether they intend to pay it. While the Third-Party Debtor's statement is not a conclusive admission of liability, it provides crucial information to the creditor. A Third-Party Debtor who willfully or negligently fails to make a statement or makes a false statement can be held liable for damages suffered by the creditor as a result.
• Competing Seizures (Sashiosae no Kyōgō, 差押えの競合 - Article 149, Civil Execution Act):
  If multiple creditors serve Seizure Orders on the same Third-Party Debtor for claims against the same Debtor, and the total value of the seized claim is insufficient to satisfy all of them, the seizures are deemed to "compete." In such cases, the effect of each Seizure Order typically extends to the entirety of the seizable portion of the claim. The proceeds subsequently collected or deposited will then be distributed proportionally among the competing creditors by the execution court, unless specific statutory priorities apply.
• Deposit by Third-Party Debtor (Kyōtaku, 供託 - Article 156, Civil Execution Act):
  To avoid the risk of making an incorrect payment or being caught in disputes between multiple creditors or between the creditor and debtor, the Third-Party Debtor has options to deposit the owed funds:
  • Permissive Deposit (Kenri Kyōtaku): A Third-Party Debtor can choose to deposit the entire amount of the seized debt with an official deposit office (a branch of the Legal Affairs Bureau). This discharges their obligation to all parties.
  • Mandatory Deposit (Gimu Kyōtaku): A Third-Party Debtor must make a deposit if served with multiple competing Seizure Orders whose total exceeds the debt, or if a "demand for distribution" by another creditor has been served on them before they have paid the seizing creditor through other means (like collection). This ensures that the funds are properly allocated by the court.
    Once a deposit is made, the Third-Party Debtor must notify the execution court by filing a "statement of circumstances" (jijō todoke, 事情届). The court then undertakes the distribution of the deposited funds.
• Realizing the Seized Claim: Collection vs. Assignment:
  The executing creditor has two primary methods to actually obtain the funds from the Third-Party Debtor, assuming no deposit has been made:
  1. Creditor's Right of Collection (Toritateken, 取立権 - Article 155, Civil Execution Act): One week after the Seizure Order has been served on the Debtor (this waiting period allows the Debtor to raise any immediate objections), the Creditor acquires the right to directly collect the seized claim from the Third-Party Debtor. This collection is limited to the amount of the Creditor's own claim plus execution costs. If the Third-Party Debtor refuses to pay voluntarily, the Creditor can file a "collection action" (toritate soshō, 取立訴訟 - Article 157) against the Third-Party Debtor in court. This is a lawsuit specifically for enforcing the seized claim.
  2. Assignment Order (Tempu Meirei, 転付命令 - Article 159, Civil Execution Act): As an alternative to direct collection, the Creditor can petition the execution court for an Assignment Order. If granted and finalized, this order legally transfers the seized claim (up to its face value, or kenmengaku, 券面額) from the Debtor to the Creditor in lieu of payment of the Creditor's original claim. The Creditor's claim against the Debtor is then deemed satisfied to the extent of the face value of the assigned claim, irrespective of whether the Creditor actually succeeds in collecting it from the Third-Party Debtor. This is a powerful tool that grants the Creditor priority over other unsecured creditors who might later try to seize the same claim. However, it carries the risk that if the Third-Party Debtor is insolvent or has valid defenses to payment, the Creditor might end up with an uncollectible claim while their original claim against the Debtor is considered satisfied. Assignment Orders are therefore most commonly sought when the Third-Party Debtor is highly creditworthy (e.g., the government, a major financial institution, or a stable corporation). An Assignment Order is ineffective if, before it is served on the Third-Party Debtor, other creditors have already seized the same claim or demanded distribution.

Special Considerations and Conclusion

The landscape of monetary claim execution in Japan is continually evolving. Recent Supreme Court decisions have significantly shaped the acceptable methods for specifying bank accounts, generally favoring approaches that do not place undue burdens on third-party financial institutions. Protections for debtors, especially concerning wage garnishment and essential living expenses, remain robust.

For creditors, success in this area hinges on diligent investigation to identify seizable claims, precise drafting of petitions and seizure orders, and a strategic approach to choosing between direct collection and the more conclusive (but potentially riskier) assignment order. The involvement of third-party debtors adds a layer of complexity, requiring careful adherence to notification and service procedures. While challenges exist, particularly in asset discovery, execution against monetary claims remains a fundamental and frequently utilized component of debt recovery in Japan.