When are wages garnished?
Generally speaking, if you fall behind on a payment, creditors won’t take garnishment of your wages as a first resort. However, wage garnishment may be the creditor’s best option if all other attempts at collection have failed or if the statute of limitations—the time limit within which debt collection is enforceable—is drawing near.
A creditor will probably first foreclose or repossess your property if you have secured loans, like a mortgage or auto loan, and then sell it to recover its losses. Should the amount of the sale not satisfy your debt, the creditor may attempt to deduct money from your paycheck until the outstanding balance is settled.
Prior to garnishing your wages, the majority of creditors must file a lawsuit and obtain a court judgment. The judgment will specify how much you owe, and it may include interest and fees in addition to the initial debt. The creditor may use the court order to demand that your employer deduct money from your paycheck in order to pay off your debt.
Alternatively, administrative wage garnishment (AWG), which can be implemented without a court order, may result from unpaid student loans, back taxes, alimony, or child support.
6 Options If Your Wages Are Being Garnished
You may be able to keep your wages from being garnished or decrease how much is taken out in several ways. As a quick aside, before you start on your own, you could consult with an attorney who has a better understanding of the laws and consumer rights. The Legal Services Corporation, a nonprofit, could help you find low-cost or free legal aid if you’re not sure where to start.
Try To Work Something Out With The Creditor
Attempting to cooperate with the creditor who wishes to garnish your wages is one of the first actions you can take. Negotiating a lower monthly payment than what would be deducted from your paycheck might be possible. Alternatively, you may be able to work out a debt settlement and pay off the debt in full with a single lump sum.
File a Claim of Exemption
You might be able to file a claim of exemption and stop or decrease the wage garnishment based on your personal and financial situation. For instance, many states offer a head of household exemption for debtors who have a dependent, such as a child or elderly parent, that they financially support.
Challenge the Garnishment
If more money than necessary is being deducted from your paychecks or if the creditor did not follow the proper procedures, you may be able to contest the wage garnishment on several grounds.
Additionally, confirm that you truly owe the debt by looking over the paperwork that the courts or your employer send you. A creditor may be able to stop the garnishment and have the debt cleared if they are attempting to collect on a debt that you do not owe, such as one that you have already paid or that was dismissed in bankruptcy.
Consolidate or Refinance Your Debt
Refinancing or debt consolidation entails obtaining a new loan to settle your current debts. If you’ve fallen so far behind on your bills that your wages are being garnished, it will be challenging to get approved for a new loan. However, it may be possible.
A secured loan, like a home equity loan or home equity line of credit, might be available to you. This isn’t always the best course of action because you run the risk of losing your house if you can’t afford the debt, but paying off your creditors with the money could prevent the garnishment.
Work with a Credit Counselor to Get on a Payment Plan
It might be possible for a nonprofit credit counseling group like Money Management International to bargain with your creditors on your behalf. If the counseling organization manages your payment plan instead of the creditor and the courts, you may be able to get on a more manageable one.
Though it may seem like a drastic measure, filing for bankruptcy may be the best course of action if you are deeply in debt. You might be able to stop the wage garnishment right away and have the underlying debts discharged by declaring bankruptcy. A knowledgeable lawyer can help you decide if filing for bankruptcy would be a wise course of action in your situation.
Limitations On Wage Garnishment
Federal regulations restrict the kinds of income that can be garnished as well as the amount that can be taken out.
Generally, the following can’t be touched:
- Social Security disability, retirement, and dependent/survivor benefits
- Supplemental security income (SSI)
- Temporary Assistance for Needy Families (TANF)
- General assistance
- SNAP (food stamps)
- Unemployment insurance benefits
- Veterans benefits
- Child support
- Alimony/maintenance
Other types of federal aid may also be exempt and your state may have additional laws that protect certain forms of income.
The amount of your garnishable income may vary based on the kind of debt you owe. The cap is typically expressed as a percentage of your disposable income, which is what’s left over after taxes and other mandated deductions from your pay are made:
- The majority of consumer debt is the $217 difference between your disposable income and 25% of your income, whichever is lower. 51 (i. e. , 30 times the federal minimum wage of $7. 25 an hour. If the minimum wage changes, this will change as well).
- Up to 60% of your income may be used for child support or alimony (or 50% if you have another child or spouse). If you’re more than 12 weeks behind schedule, your limit might go up by an extra five percent.
- Federal student loans: You may borrow up to 15% of your available funds.
- Back taxes: Up to 15 percent of your disposable income.
Page three of this U.S. Department of Labor fact sheet has several examples you can read through to better understand how these limits work. Keep in mind, these are only the federal limits. State laws may have stricter limits and protect a larger portion of your pay.
Speak with a nonprofit credit counselor right away if you’re concerned about a wage garnishment that may occur in the near future. We can provide you with instant peace of mind and assist you in starting your recovery.
Personal finance writer Louis DeNicola is passionate about offering tips on credit and money management. His writing can be found on Credit Karma, MSN Money, Cheapism, Business Insider, and Daily Finance in addition to being a contributing writer at MMI.
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FAQ
Is there a way around wage garnishment?
Take immediate action to stop wage garnishment. Once wage garnishment has begun, you have the option to file a Claim of Exemption at any time. However, you will only be reimbursed for your wages from the time the claim is submitted. You can stop it before it even starts if you take swift action. Your employer is not allowed to fire you by law for a single wage garnishment.
How do I write a letter to stop wage garnishment?
I’m writing to ask that the wage garnishment that is currently being applied to me be stopped, Sir/Madam. I’m having trouble making the payments right now because of [insert reason, like being in financial hardship]. I have attached documentation that supports my claim.
Which states prohibit bank garnishment?
Which States Don’t Allow Bank Garnishments? All 50 states allow bank garnishments. However, four states prohibit wage garnishment for consumer debts. According to Debt. org, North Carolina, South Carolina, Texas, and Pennsylvania are those states.
How much can the state of Michigan garnish your wages?
Depending on which is less, a creditor may receive up to 25 percent of your disposable earnings or the portion of your disposable earnings that exceeds 200% of the federal minimum wage (currently $217). 50). Your disposable earnings are the funds remaining in your paycheck after any legally mandated deductions.
Read More :
https://www.moneymanagement.org/blog/what-can-you-do-if-your-wages-are-being-garnished
https://acclaimlegalservices.com/debt-solutions/judgments-and-wage-garnishments/how-to-stop-a-garnishment.html