Ins and Outs of Wage Garnishments

Wage garnishments are a last resort for creditors in an effort to collect a debt from a consumer. Once in place, garnishments can be a tremendous financial burden as the payments are automatic and reduce your take home income significantly, making it difficult to pay basic living expenses.

How Wage Garnishments Occur

When you are in default on a debt and have not made payment arrangements, the company may seek an order from a court in an effort to collect the debt. Once the company proves you owe the debt, a judgement will be entered in their favor. After a judgement, the creditor can take the court order to the sheriff and they will send it to your employer, who is required by law to begin garnishing your wages.

Most wage garnishments require a court judgement making it essential to open and respond to collection notices or court papers regarding a pending lawsuit. This is not the time to avoid creditors, as a wage garnishment can be particularly harsh.

When Can Wages Be Garnished Without a Court Order

There are three occasions that can result in wage garnishments without a judgement. These include back taxes, student loans and child support.

Back Taxes. The IRS can garnish wages and bank accounts without a court order. They garnish the largest percentage of wages leaving you with very little to live off. State and local tax agencies can also garnish wages.

Some Types of Student Loans that are in default can result in wage garnishments without requiring a lawsuit. The maximum they can take is 15% of your disposable earnings (earnings after taxes, Medicare and social security).

Child Support is one of the most common garnishments. When the judge sets child support, the wages are garnished to ensure payment. The courts or other parent will forward the order to an employer to begin payments. If alimony and child support are entered in the order together, wages can be garnished for both. Child support can take up to 60% of disposable earnings with an additional 5% if support is behind by more than 12 weeks.

Court Ordered Wage Garnishments

Court ordered wage garnishments are most commonly secured by credit card companies or the collection agencies the account is sold to. The company can receive 25% of disposable earnings or the amount of wages that exceed 10 times minimum wage, whichever is less.

The amount that can be garnished varies by state. If the state has lower requirements than federal laws the lowest amount is taken. This will be in place until the judgement is paid in full.


What to Do If Your Wages Are Garnished

You will be notified by your employer if wages are set to be garnished. At that point your options are very limited. You can appeal the garnishment and prove you need more each week to pay basic living expenses, but generally the garnishment will be in place until the debt is paid off.

Filing bankruptcy can stop wage garnishments for judgements, although it will not stop IRS, child support or student loan payments.

Getting Help
The best way to handle wage garnishments is through prevention. If you are contacted by collection agencies get help from professionals to deal with them. Seeking competent representation through a credit card modification program can be an effective way to proactively negotiate your debts and receive legal representation should an account moves into a legal recovery status. When bills are late but not yet in default you have the most options available to you. The further down the collection road you get, the fewer number of options are available. Once a judgement is in place, most creditors are no longer interested in negotiating a settlement.

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