Individuals who are delinquent on paying their debts run the risk of having their wages garnished. In short, a wage garnishment is a court order that instructs an employer to withhold part of an employee’s wages and pay that amount directly to a creditor until the debt is satisfied. In addition, if a money judgment is entered against you as a result of a lawsuit, the prevailing party can ask the court for a wage garnishment.
In order to obtain a garnishment, creditors must first attempt to collect the debt and then seek a judgment from the court stating that you owe them money. However, in some cases, wages can be garnished with a judgment, including unpaid taxes, spousal and child support arrearages, and student loan defaults.
Under Federal law, a wage garnishment cannot exceed the lesser of 25 percent of your disposable income (the amount that remains after mandatory deductions) or an amount 30 times greater than the minimum wage. However, some states impose stricter limits. Lastly, these thresholds do not apply to back taxes, child and spousal support or student loans.
There are ways to defend a wage garnishment. For example, if you can show that the garnishment will cause financial hardship, the court may agree to reduce the amount or even eliminate the garnishment. This requires filing a Claim of Exemption with the court that issued the garnishment. A hearing will be held to weigh any evidence that the garnishment will lead hardship such as a foreclosure, eviction or other drastic action.
Another alternative is to file Chapter 7 bankruptcy. When you file bankruptcy, an automatic stay goes into effect that stops most collection activities, including wage garnishments. If you receive a discharge and the debt in question is included, the garnishment cannot be resumed.
However, filing for bankruptcy requires careful consideration since it will have a long lasting impact on your creditworthiness. Ultimately, if creditors have started collection activities against you or your wages have been garnished, an experienced bankruptcy can advise you of your options.