If you owe money, wage garnishments should be a real concern under certain circumstances. Wage garnishments occur when a creditor gets a judgment against you to take money out of your paycheck or your bank account. It doesn't just happen when you owe money on credit cards, medical bills, or repossessed vehicles. A garnishment order can also be issued if you owe child support or alimony.
In this article, you'll learn more about the common sources of wage garnishments as well as what you can do to stop garnishment orders. If you have questions after reading this article about how to stop wage garnishments or debt management, schedule a free consultation with the Law Offices of B. David Sisson.
What Is a Wage Garnishment?
The Department of Labor defines wage garnishment as a legal procedure in which a person's earnings are required by a court order, known as a garnishment order, to be withheld by their employer for the payment of a debt.
Title III of the Consumer Credit Protection Act stops an employer from firing an employee simply because a garnishment order is issued against them or because the employee is being sued because they owe money. Title III also protects employees because it limits the amount of earnings that may be taken from an employee in any single week. Yet, it does not protect the employee from having multiple garnishment orders taken out of their earnings.
Common Reasons for Wage Garnishments
The most common reasons for wage garnishments are:
Unpaid student loans
Child support payments (regardless of whether there are arrearages)
Spousal support (regardless of whether there are arrearages)
Garnishment orders are a source of stress for most, although some people who are ordered to pay child support and alimony agree to these orders to make budgeting easier (and that's okay!). They can cause a sense of internal shame, not to mention impact your credit. Yet, wage garnishments aren't all that uncommon.
According to CreditRepair.com, a study conducted by ProPublica on behalf of ADP, the United State's largest payroll services provider, showed that 10% of all American's who are between 35 and 44 years old live with a garnishment order. The study included 13 million employees between 2011 and 2013.
How Much of Your Earnings Can Be Taken from a Garnishment Order?
Determining the amount of income that can be taken from a garnishment order depends on why the garnishment order was issued. For child support and alimony, it can be up to 50% or 60% if you do not have a spouse or another child to support. If you are three months behind, an extra 5% may also be taken.
For student loans, up to 15% of your earnings per pay period can be garnished without a court order if you are in default. However, it cannot be more than 30 times the federal minimum wage. You must be given a 30 days notice that tells you how much you owe, how to get documentation about the garnishment, and how to request a hearing.
For federal government taxes, the amount the IRS may garnish depends on the dependents you claimed as well as your deductions. The tax code only states what the IRS must leave in your bank account or as your earnings.
As for unsecured debts such as credit cards or medical bills, Oklahoma law limits creditors to 25% of your disposable earnings for the week or the total of your disposable earnings for the week exceeded 30 times the federal minimum hourly wage which is currently $7.25 per hour. Disposable earnings are defined as what you are paid after your employer takes the required legal deductions.
What If You're Surviving on Social Security or Veteran's Benefits?
If you owe money and you're surviving on social security or veteran's benefits, you are not necessarily protected from a garnishment order. Money that is directly deposited into a bank account can still be seized according to state law.
How to Stop Wage Garnishments
One way to stop most wage garnishments is to file for bankruptcy. When you file for Chapter 7, an automatic stay stops all creditor collections, including garnishment orders. The main exception is wage garnishment for child support or alimony. Domestic obligations cannot be discharged. However, consumer debts such as money owed from credit cards, medical debts, personal loans, and the likes are covered by the automatic stay.
If you choose to file for Chapter 13 bankruptcy, all wage garnishments stop, including domestic obligations. This is because Chapter 13 bankruptcy includes a repayment plan that is approved by the court.
The repayment plan includes all debts, including child support and alimony. After the plan is approved by the bankruptcy court, your disposable income is used to pay the debts for a period of three to five years. Domestic obligations are paid in full. Unsecured debts, such as credit cards or medical bills, may receive some or all of what was owed regardless of whether they were initially being paid via a garnishment order.
Once a bankruptcy case is filed, the court notifies your creditors. While this can take a little time, generally about a week, the wage garnishment does stop. You can help by providing your employer and the creditor garnishing your wages with your bankruptcy case number, filing date, and the court location. Your creditors may also request a copy of your Schedule F, which lists your unsecured creditors. At this point, wage garnishment is legally required to stop.
What Happens After the Bankruptcy?
Once you receive your discharge, a creditor who previously had a wage garnishment against you cannot just pick up where they left off. The exception is if the debt was non-dischargeable. An example would be child support. Another example is certain types of back taxes.
If you do not receive a discharge, the automatic stay is lifted. All creditors would then be free to resume their collections efforts, including renewing the wage garnishment.
Learn More About Wage Garnishments
If you have questions about how to handle or stop wage garnishments, the Law Offices of B. David Sisson offers free consultations. Schedule yours today!