Wage garnishments are an effective way to enforce your court-ordered judgment. When debtor’s fail to pay the money they owe, legal collection efforts need to be implemented in order to satisfy the debt. The process is fairly simple, and we’ll explain how this legal procedure works.
So, what is a wage garnishment? Garnishing wages is a legal way for a judgment creditor to collect on debts owed. Court authorized, wages can be seized, usually about 25% per month, until the debt is satisfied.
A Wage Garnishment is a pretty straightforward process: In a typical case, your employer deducts 25% from your paycheck and sends it to the creditor. Most wage garnishments are the result of unpaid taxes or back owed child support, but it’s not unusual for credit card debt to be converted to a Judgment through the legal process.
If you have a credit card account that goes into default, the creditor may decide to sell it to a Collection Agency. If the Collection Agency spends a lot of time trying to collect, and they’re unsuccessful, they may decide to turn it into a Judgment. This is usually accomplished by filing a lawsuit in Small Claims Court or Superior Court. Ouch.
If you’re a creditor, the first item on your to-do list is to find the subject’s employment. I wrote an article on how to find someone’s employment that will help you accomplish this task.
Starting Point: The Court-Ordered Judgment
There is one thing that you can be sure of – the Creditor wants to recover their losses. If the credit card company, or debt collection company, is unsuccessful in recovering the debt, they may and turn it into a Judgment. If the ruling goes in their favor, and against you, a Judgment may be issued. This then gives the creditor the legal authority to garnish your wages, levy on your bank accounts, and even put an abstract on any property that you own – or may own in the future. Make no mistake – a court-ordered judgment is a very powerful piece of paper.
Once the judgment against you is rendered (you usually have 30 days to file an appeal), there’s not much you can do. You could ask them to lower the garnishment amount because, by law, they can take 25% of your disposable wages. Or settle. Or declare Chapter 7 or 13 bankruptcy.
You could try and argue that the amount being deducted from your paycheck is causing severe hardship. If State and Federal garnishment laws conflict, the garnishment has to be adjusted to the lower amount. You may wish to check the United States Department of Labor website and read up on wage garnishments.
Another problem you’re going to have with the Judgment against you is that if you own property, the creditor can file an abstract in that County which essentially puts a lien on any and all property you own in that County. Even worse, if you do not currently own property, the abstract/lien will attach to any FUTURE property that you may own. You won’t be able to sell or refinance until the Judgment is paid off. Actually, upon the sale of the property, the Judgment Creditor gets paid off first. There goes your equity.
Types of Wage Garnishments
You could have your wages garnished for any number of reasons. Listed below are the most common reasons why your wages could be garnished:
- Student Loans
- Child Support
- Back Taxes
- Medical Bills
- Unpaid Court Costs
- Credit Card Bills
There may be other reasons, but the above will encompass about 95% of the reasons why your wages are being garnished. Remember that credit card bills can be converted to judgments. That’s not good, as now banks that issue credit cards can now come after you.
What Rights Do I Have?
Debtors have rights, and most are listed under The Fair Debt Collection Act (FDCA). Legal actions taken by creditors are closely watched by the government, so don’t be afraid to exercise your rights. Know the law, and consult with a competent attorney if needed.
A court order is needed in order to garnish wages. Child support and back taxes may not apply here. Employers are simply not going to withhold your wages unless they’re forced to by legal means. They will be served with the proper paperwork, and then start the garnishment. There are also fines and other legalities involved when employers do not comply.
It’s up to you to know the law. There are limits as to how much money can be garnished each month, and for how long the garnishment actually lasts. Do your homeowrk and understand the process.
Wage Garnishment Exemptions
There are certain monies that wage garnishments cannot touch. These are not written in stone, but they give you a pretty good idea of what cannot be garnished.
- Child support money
- Social Security
- Some retirement accounts
Also, remember that your wages can be garnished at only 25%. There are some exceptions, but you can follow that guideline. And, it’s 25% TOTAl for the pay period. It doesn’t matter if there are multiple garnishments in place, as they can only withhold so much. Usually, only one garnishment would be in place at a time. When that debt is paid, then the next garnishment would take its place.
How Can I Prevent a Wage Garnishment?
This can be tough and takes some work. If filing for bankruptcy is out of the question, then you do have a few options. Remember that just because you file for bankruptcy doesn’t mean that the bankruptcy attorney will allow you to go through with the process. Many times, they will determine that you have plenty of options and dismiss your bankruptcy claim.
- As a last resort, file for Chapter 7 bankruptcy.
- Did the creditor follow procedure? Respond to their demand letter.
- Is the debt already paid off? You’re going to need proof.
- Talk with the creditor and explore other options. Negotiate and possibly settle for a lesser amount.
- Some states offer additional remedies to wage garnishments. Explore them
It’s hard to prevent wage garnishments. If you legitimately owe the debt, there’s really not much you can do. Consult with a qualified attorney to explore your options. Remember that you can always pay additional money each month to pay off the debt quicker.
A Creditor’s Wage Garnishment Process
I’m going to assume that you have a court-ordered money judgment that has survived any appeal process. You’re golden. Below is a very general scenario – but you get the drift.
First, you must find out where the debtor works. You may already know this, but if not – check out my article on finding someone’s employment here. Once you have verified where your debtor works, follow this simple process:
- Apply for a “Writ of Execution” at the Court House
- Double check to make sure your debtor is still currently employed
- Call the Sheriff’s office and ask if they perform wage garnishments. If not, use a Private Process Server
- Pay the appropriate fee and let them handle the wage garnishment process and file the necessary paperwork
- Wait to hear from the Sheriff. Be patient as the debtor may file a claim of exemption.
- The employer complies and sends the money to the Sheriff each pay period
- The Sheriff with retain certain fees (usually a small amount), and forward the rest to you
- This will continue until the judgment is satisfied – or the debtor quits his job
What if the employer does not comply? Usually, the employer has 10 days to comply. If the employer does not respond, he may be held liable for a portion of the debt. Good stuff!
I Paid Off the Debt. What’s Next?
OK, so you paid off the debt. What comes next? Usually, the wage garnishment ends for any one of the following reasons:
- You actually paid off the full amount of the debt
- You filed Chapter 7 bankruptcy
- you filed Chapter 13 bankruptcy and are re-paying the debt under a different plan
- You settled the debt for a definitive amount
- You filed with the court to stop the wage garnishment
Once you pay off the debt, make sure you get confirmation from the original creditor. Keep a copy of the paperwork in a safe place showing the full payment of your debt. Monitor your credit report and make sure that it’s up to date. There is nothing more frustrating than paying off the debt and it still shows as a negative on your credit report.
As for your credit report, it’s still going to show that you had the debt, it was legitimate, and that you paid if off. It depends upon the state as to how long this will stay on your credit report.
If a wage garnishment has been filed against you – don’t panic. Comply with the court order, and attempt to settle or pay off the debt. Your employer has no choice but to comply, and there are penalties if he doesn’t, so don’t try and negotiate with him. Make no mistake – a wage garnishment is a very negative entry on your credit report. Anyone pulling your credit will see this, and if you’re applying for any sort of new credit – it will be a factor.
If you’re a creditor, simply Google “wage garnishment” in your state and check out the process. Each state and county have some general policies, so make sure you know what you’re doing.
What if a wage garnishment starts and it’s not my debt? This can create problems. If it’s not your debt, then obviously something is messed up. You may be a victim of identity theft, or it may be a debt you had in the past that you already paid off. You need to look into this immediately.
How can I stop the wage garnishment? First, ask yourself if this is really your debt. If it is, then you probably have no choice but to comply – or negotiate with the creditor. Wage garnishments are serious business and you should do whatever you legally can to stop the garnishment – or pay the debt.