If you fall behind on your bills, your creditors might employ wage garnishment as a last-ditch method to collect on the debt. A creditor can legally seek to seize a portion (as much as two-thirds) of your wages to satisfy a debt.
This is a serious situation, but you don’t have to take it lying down. Fully understanding wage garnishment, how it might apply to you, and your rights and options will enable you to tackle the problem with skill and protect yourself from the negative effect of lost wages.
When Wage Garnishment Happens
Wage garnishment is a last resort for creditors. It can only happen after creditors have tried multiple times to get you to pay a delinquent loan, whether on a credit card, student loan, medical bill, support obligation, or some other outstanding debt.
Creditors will send letters, contact a debt collection agency, and talk to you multiple times over the phone about what you owe. After you’ve been amply warned of impending legal action on delinquent loans, creditors can get a court order to withhold a portion of your wages as repayment for your debts.
Your creditor will file a lawsuit against you, also called a judgment, and the court will order wage garnishment. Your employer will be notified, and the judgment will reside on your credit report for years thereafter.
This can obviously have significant long-term effects on your financial status. Because of the stress and financial difficulties, it’s best to take action long before the garnishment occurs.
Don’t ignore your final notices and work with instead of against your creditors for the best result.
Types of Wage Garnishment
There are typically two kinds of wage garnishment: garnishments to pay judgments and administrative wage garnishments. Garnishments to pay judgments mean a portion of your wages will be garnished to cover a particular debt.
The creditor must file a lawsuit and your employer will carry out the mandate. These are most common for credit card debts and back taxes.
Administrative wage garnishments occur when a creditor does not need a court order to seek a delinquent loan. The creditor can order you to pay up to 15 percent of your disposable income to cover a non-tax related delinquent loan. This is most common in the case of student loans.
You Have Rights
When a creditor pursues a judgment against you, recognize that you have rights. There are limits to wage garnishment, and the more you know about the process, the better off you’ll be.
Here are some things you should know about the limitations on a wage garnishment judgment.
- Creditors are not allowed to demand your whole paycheck, according to Title III of the Consumer Credit Protection Act (CCPA). The amount of money they can seize depends on the type of judgment, your disposable earnings, and state regulations.
- An employer cannot fire you for having your wages garnished the first time it happens. However, if it’s a repeat offense, your employer is held to no such standard. You could lose your job if you face a wage garnishment judgment for multiple debts.
- Wage garnishment does not apply to certain types of income like disability payments, Social Security, retirement funds, child support, or other non-wage sources of income.
- You must be given the opportunity for a hearing. If this opportunity is not granted within 30 days of your receipt of notice, the garnishment cannot proceed.
- Most wage garnishments require a court order to proceed. If your creditor has not presented one, contact a lawyer to determine whether your wages can be legally garnished.
Know Your Options
A wage garnishment won’t go away if you ignore it. The problem will only increase if you don’t take appropriate action.
To limit the impact on your finances, you must act quickly. Contact an attorney immediately to seek legal advice on the matter and learn which options will best match your needs.
Your attorney will give you advice on the next steps to handle your wage garnishment. Depending on your case, you’ll probably be choosing from the following options.
Work Out Something With Your Creditor: Preventing your creditor from pursuing a judgment is the ideal option, although it won’t always be possible. When you receive notice that the creditor is filing a judgment, contact the creditor immediately and see if you can work out a payment system instead. Creditors are anxious to get their money back, so they may be willing to make a deal.
Challenge the Garnishment: If you feel a wage garnishment has been issued in error, you can raise an objection. The process begins with filing paperwork with the court, to provide personal information and the grounds for your objection. Consult a lawyer during this process to plead your case appropriately.
Vacate the Judgment: Although this legal process is not exactly simple, it can be an effective way to get you off the hook. To vacate a judgment, you must have proof of adequate grounds, such as newly discovered evidence that renders the debt invalid, creditor fraud or misconduct, lack of jurisdiction, etc.
It must be filed within one year of the judgment being issued. If successful, the judgment may be completely expunged from your financial records as if it never happened.
Chapter 7 Bankruptcy: Sometimes, there’s no getting around the judgment, but you can try to get a fresh start and improve your financial situation from this point onward. Chapter 7 bankruptcy will discharge your debt (excluding student loans, support obligations, and taxes) and stop wage garnishments. It will also enact an automatic stay that prevents creditors from continuing collections communications.
File an Exemption: As mentioned previously, wage garnishments are not all-powerful. They cannot be applied against certain types of income such as retirement funds, support funds, Social Security, or other government program payouts.
If you file an exemption, you can stop a wage garnishment and avoid this long-lasting stain on your financial records. (Note: An exemption cannot be filed for child support garnishments.)
Contact the Rowdy G. Williams Law Firm Today!
Wage garnishments can be overwhelming. There’s a lot to the process, and if you’re already in over your head with overdue debts, you might not know the next step to take.
The Rowdy G. Williams Law Firm can help. Our team of certified Indiana attorneys have your best interest in mind during a wage garnishment.
You have rights and options, and we want to be sure you take the best road for you. For more information about taking charge of a wage garnishment judgment and getting a fresh start, contact us today!