Getting into debt happens to the best of us. Sometimes, we find ourselves in financial situations that we, unfortunately, can’t get out of. A wage garnishment is when the court issues an order requiring your employer to withhold a certain amount of your paycheck because of a debt you owe. The collected amount is sent directly to the person or institution until your debt is paid in full. Before looking at how to stop wage garnishment, we’ll provide an overview for context.
Types of Wage Garnishments
In wage garnishment: This is when a creditor can legally require your employer to hand over a portion of your earnings in order to pay off debts.
In non wage garnishment: This is commonly known as a bank levy and is a process that involves creditors tapping into your bank account to attempt to collect on any debts you owe.
A garnishment generally happens when a creditor sues you for nonpayment of debt and wins the case in court. With that said, there are instances where a creditor can garnish wages without a court order. This can be seen in situations where you have a balance on a federal student loan, back taxes or if you owe money in child support.
How Much of Your Wages can be Garnished?
The amount of wages that can be garnished will depend on the type of debt that you owe. Regardless, federal limits how much disposable income a creditor can take. To get a better idea, here is the percent of weekly disposable income that can be taken for 4 different types of debts.
Child Support and Alimony: Creditors are allowed to take 50% of your disposable income if you are supporting another child or spouse. If this is not the case, they can take up to 60%. In the event that you are more than 12 weeks late in payments, creditors can take an additional 5%.
Consumer Debts Including Credit Card, Medical Bills, and Personal Loans: Creditors can take either 25% of disposable income or the amount by which your weekly income exceeds 30 times the federal minimum wage (whichever is less).
Federal Student Loans: Creditors can take 15% of disposable income.
Taxes: Creditors can take up to 15%. However, the Internal Revenue Service will determine the amount taken based on standard deductions and the number of dependents you have.
So How Can You Stop Garnishment?
It’s a lot easier to prevent wage garnishment than to stop it. Most creditors would much rather set up some sort of payment arrangement or settle the debt. However, if you are already facing garnishment, there are ways to stop it. Here are three general ways you can consider stopping your garnishments.
1. Negotiate With your Creditor
Even if your creditor has put in a motion for wage garnishment, there’s still an opportunity to stop it. The first thing that individuals should consider doing is negotiating with their creditors. A simple negotiation can take you a long way and is going to be one of your best options to stop a garnishment.
In a negotiation, individuals should call their creditors and see if they can get them to agree to a repayment plan or to settle the debt for less than what they owe. Many creditors will be open to this because they want to recoup as much money as possible and should stop the garnishment from happening.
If a creditor does agree to a repayment plan or debt settlement, be sure to get it in writing before paying any money to them. This is because terms can change and if there’s an issue, it’ll be the creditor’s word against yours.
Additionally, it’s important to know what you can afford when negotiating a repayment plan. After all, you don’t want to fall back into the same situation. This means that you need to go over your income and expenses to figure out what you can actually afford.
2. Show That There is a Financial Hardship
There is a way to challenge the garnishment if you can show that there will be a financial hardship as a result. If you’ve lost or got fired from a job, your work hours were cut drastically, you’re filing for Chapter 7 or 13 Bankruptcy or failing to pay basic expenses such as food, rent or utilities, you can state your case to the courts.
Creditors know that in these types of situations you are less likely to have the money to pay them anyway. It will be in their best interests anyway to let you get back on your feet and then come up with new terms to pay off the debt.
3. Consider Filing for Bankruptcy
Bankruptcy should be the last resort for individuals in debt. However, sometimes it’s the only option available. Bankruptcy can give you a fresh start and stop your wages from being garnished. Individuals that are drowning in debt and struggle to pay basic living expenses may find that bankruptcy is the only option for them. This will stop your garnishment from happening and help you slowly get your finances together.
Every debt isn’t created equal. For this reason, we’re going to discuss what you can do to prevent garnishment for a particular type of debt that you owe.
Child Support and Alimony: If you owe in child support or alimony, you should consider working with the courts to develop an ideal payment plan before they garnish your wages. In the event that you owe in child support, individuals can seek child support modification if you are going through financial troubles.
Consumer Debts: To challenge your consumer debts such as a credit card or medical bill, you will need to fill out paperwork and potentially attend a hearing. The forms will outline details of your case and include pertinent financial information such as your monthly household income and living expenses.
Federal Student Loans: If you default on your student loans, you should be given a 30-day written notice. This means you have a 30-day window to make a written objection and request a hearing, modify student loan payment plan or request hardship assistance.
Taxes: Individuals who owe taxes should receive a written letter from the IRS letting you know that they intend to garnish your wages. If you owe for state taxes, you have the opportunity to contact your state’s franchise tax board to try and set up an alternate payment plan if a garnishment will result in financial hardship.
We know that garnishment can be a stressful experience. The good news is, there are various options available to you to help you stop a garnishment before it happens. At Civic Tax Relief, we are your trustworthy support system here to help you get out of debt fast. If you have questions about wage garnishment or want to learn more about how we can help you obtain debt relief, contact us today.