Wage Garnishment: What Is It and How to Stop It
Posted on July 13, 2021 in Debt
Wage garnishments allow creditors to obtain repayment directly from your paycheck or bank account. Are you currently facing or fear you soon will be facing a garnishment? Here’s how they work and what you can do.
What does garnishment mean on a paycheck?
Wage garnishment is a collection action that usually occurs after a legal proceeding where a debtor is involved in a lawsuit for not paying on a debt owed. A judge grants the creditor the ability to take a portion of a debtor’s earnings from their paycheck through wage garnishment law.
How common is it to have your wages garnished?
If you have received notice of wage garnishment, know that you are not alone. According to ADP, about 7% of U.S. employees have at least one wage garnishment. 12% of people with a wage garnishment have more than one– how is that possible? There are different types of wage garnishments.
What are the types of garnishments?
- A wage garnishment places a legal obligation on employers to collect money from the debtor’s paycheck to pay back a debt.
- A non-wage garnishment, such as a bank levy, gives creditors the ability to garnish earnings directly from the debtor’s bank account.
- Be wary of the legalities around property seizures, particularly where child support is involved. If wage garnishment is not enough to cover the total amount owed, your personal property could be confiscated to obtain support for a child or children.
Is a court order required for a garnishment to become effective?
Although a court order is usually needed, there are some instances where a court order is not needed to initiate a wage garnishment. For example, matters such as child support back pay, student loan payments, and back taxes can trigger wage garnishment without a court order.
How do I know that the court order for a wage garnishment is legitimate?
Wage garnishments must meet the following requirements:
- The notification must be delivered legally, by proper personnel, with service to the debtor’s home, place of employment, and/or financial institution. If you have evidence to suggest that this was done improperly, use that fact in response to the order.
- You must owe the debt, and the information about the debt must be correct. If either of these is untrue, you need to file a dispute addressing these inaccuracies.
- Some forms of income cannot legally be garnished. This varies based on the type of debt owed. For wage garnishment, this could be social security, SSI, or veteran’s benefits. However, the aforementioned earnings can be distributed towards student loans or tax debts. For wages garnished for child support, income from a second job or overtime pay may be handled differently from state to state. If the order involves giving a creditor access to earnings that they are not legally entitled to, this is a reason to contest the order.
For more specific information on which types of earnings can be garnished during a given pay period, visit the U.S. Department of labor website to view the federal government wage garnishment fact sheet. You will also find other helpful resources and examples on the site, including illustrations of scenarios regarding the statutory tests for determining the amounts subject to garnishment, based on the current federal minimum wage.
Can debt collectors garnish wages? Can credit card companies garnish wages?
Most creditors can garnish your wages. However, the processes for creditors to do so are not cut and dry. The answer depends upon the type of creditor, the requirements they must meet, and the type of debt you owe.
For example, see our resource on can payday loans garnish your wages?
How long do you have until one of your creditors takes you to court?
When you receive a collections notice, you can ask for verification of the debt. The creditor has a month to respond with the verified amount owed, otherwise you will be able to have the unpaid collection removed from your credit report. After that, if they do verify the debt amount then you have 30 days to pay the debt or enter a payment plan. If at any point, neither of these actions are taken by the debtor, then the creditor may initiate a lawsuit. A special type of collections notice is referred to as a demand letter; this is the final collections notice.
How can I stop a wage garnishment immediately?
When a judgment is issued ordering a debtor to have their wages garnished, there will be notices sent to the debtor, the debtor’s employer, and/or their financial institution. The period from the date of the notice and the initiation of wage garnishment can vary between one week and one month. Due to this stringent timeframe, you will need to respond to the wage garnishment order right away, regardless of how you intend to answer the order. Evaluate your finances and figure out how this garnishment will affect you and/or your family. Seek legal advice.
Depending on your state law, there may be another remedy available to you: appointing a trustee as the middleman between your payments and the entity owed. Contact your local court to find out how to answer the order and what the fee associated with filing a response is. For child support orders, you will need to contact the family court in the state where the child support order was entered. This will also prevent the court from placing a default judgment on you, giving you more time to prepare a plan of action – negotiation of the payment of the debt, contesting the order, or filing bankruptcy. Note that filing bankruptcy does not rid you of child support or alimony obligations, and often times it’s worth it to find debt relief in your state instead.
Can you stop a garnishment once it starts?
Quick action is best. If you fear you will soon face having your wages garnished, you can be proactive by being on the lookout for a demand letter. This is a creditor’s final attempt to prompt you to act on the unpaid debt. Reaching an agreement with the creditor before a wage garnishment is issued saves both parties the time, inconvenience, and legal fees to move forward with a court proceeding. Respond right away if possible. If, for any reason, that is not an option, your best bet is to respond as quickly as possible to the judgment for a wage garnishment. If you do not respond or respond too late, it can be extremely difficult to reverse the judgment.
Can I quit my job to avoid wage garnishment?
If you are considering quitting your job in response to wage garnishment, know that you can, but that does not mean that you should. Most creditors can only garnish earned income. This means that if you quit your job, this limits the amount of earnings that can be garnished, as the creditor cannot get money from your employer if you are no longer making it. An important fact to note is that you cannot legally be terminated for having a wage garnishment; however, this legal protection becomes exempt if you have more than one garnishment.
Did you know they could take up to 25% of your paycheck?
Wage garnishment from your paycheck could mean that up to 25% of your earnings could be taken from your paycheck. If child support or alimony is garnished, anywhere between 50% to 60% of your disposable income earnings can be garnished. Additionally, there may be penalty fees you can incur for child support arrears. The U.S. Department of Education and the IRS can take up to 15%. Know your rights. Creditors cannot garnish more than what state and federal laws allow for garnishment.
How can I pay my bills if up to 25% of my paycheck is garnished?
If the wage garnishment order is going to bring about an undue hardship on you and/or your family, you might consider contesting the order in court, so that the details of your circumstances can be considered by a judge. While bankruptcy is listed as one of the possible solutions to wage garnishment, do your research to decide if a Chapter 7 bankruptcy vs debt settlement or another option is right for your situation.
How do I check the wage garnishment balance?
The creditor or the attorney standing for the creditor has a responsibility to keep track of the payments received towards your debt. They are also responsible for informing the court when the debt is paid off. Check with your local regulations on balance reporting because they change from location to location.
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