Career Advice - A Community Blog

Erik Larson writes about the job market, resume improvement, and career advice

Garnishment: What It Is, What You Can Do About It?

Written by Erik Larson, Community Blogger | Sep 19, 2017 8:40 PM

When a debt is owed, the creditor tries any means possible to collect. If they are unsuccessful in their recovery efforts, then they can escalate the collections process through the court. Using a civil case, anyone that is owed money may ask the court to place a judgment against the debtor in the amount owed, plus any applicable interest. The judgment allows the other party to proceed with more aggressive methods to collect their money. One of the best ways to recuperate their funds is through a wage garnishment.

What Is A Wage Garnishment?

A wage garnishment is an order that allows the lender to withhold money from a person's paycheck. The money is taken from the employer and sent to the court, which in returns sends it to the creditor. It's seen as a last ditched effort to collect. There are specific laws that govern wage garnishment in each area. In some states, like North Carolina, Pennsylvania, South Carolina, and Texas, they don't allow wages to be garnished at all.

The percentage of allowable garnishment varies. For instance, in Ohio, a person can only have 25 percent of the disposable earnings taken or the disposable earnings minus 30 times the present federal minimum wage. It becomes a big hassle to maintain a garnishment order. Anytime a person changes jobs, doesn't get many hours, or has other issues with their paycheck; it affects how much the creditor receives. There are also fees associated with the process of wage garnishment.

When wage garnishment is unsuccessful, they may seek to do a lien on a bank account or an asset. Unfortunately, in many cases, if a lender cannot get money from a paycheck, then there is usually no liens or bank accounts to seize either.

How To Avoid A Wage Garnishment?

In states where the disposable income is taken into consideration, you can avoid a wage garnishment by only showing that you have no extra income. Some states, don't use this calculation, and they just take a percentage right off the top. Child support orders always come first; then any other garnishments are taken into consideration.

Filing for bankruptcy is an excellent way to get rid of any wage garnishments. Once a petition for a chapter 7 or 13 is filed, then the collection activity must cease. A 120-day stay is placed on foreclosures, garnishments, repossessions, and collections. The lender can file a claim to have the stay lifted, but for the most part, they remain unable to do anything until the final discharge. If the case is not discharged, or it's not a debt that is dischargeable through bankruptcy, then the collection activities may continue. Some debts, like student loans and tax debts, are not covered under bankruptcy protection.

Getting Rid of Student Loans

When a student loan is 270 days behind, collection activity, including wage garnishment, can ensue. Refinancing is the best way to get help with student loans. If you're at least nine payments behind, it can cause serious actions. If you've exhausted all efforts and have no forbearance period left, then refinancing is a great option.

Getting Rid of IRS Debts

The IRS is another debt that doesn't get covered, in most circumstances, under the bankruptcy discharge. The IRS can continue all collection activities. However, just like with student loans, the IRS is willing to work with people to make payment arrangements. Most cases end up before the court because no effort was made in communicating.

The Best Way To Stop Garnishments

By far, the best way to stop a wage garnishment is not to allow it to escalate to that point. Almost all creditors will work with you if you keep the lines of communication open. Even if you are on a fixed income, and don't have a lot of extra money to give, most will accept some payment to keep the account from being taken to the next collection level.

Some states, will not allow a creditor to receive a judgment if the debtor is making small payments. Additionally, if a lender refuses payment because it's not the full amount or too little, then the judge may also side with the debtor. The best thing to do is not to throw away or ignore a notice of intent to collect a debt. Call the creditor and work out something.

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