Garnishment or wage garnishment gives a third party the go-ahead to take money from a defaulter. Either by their paycheck or through their bank account using a legal procedure. The third party or garnishee is generally the debtor's employer. Employers are forbidden by federal law to terminate a worker to avoid processing a garnishment payment. Some debt instances for garnishments include child support, penalties (monetary), unpaid student loans, and tax debts.
How does it Work?
Generally, if any defaulter is in debt, owes money, and/or has missed payments, then the creditor must issue and receive a court order to prove it and then proceed to wage garnishment. If the debt is an Internal Revenue Service (IRS) levy, then it is mandatory for a court order to be issued for the garnishment procedure. For instance, if you owe $10,000 in debt for past-due, unpaid taxes. The IRS has the right to use wage garnishment. When your tax debt is fully paid, the IRS will instruct your employer to withhold a portion of your pay for a predetermined period. Garnishments can lower a person's credit score because they are typically used as a last resort to collect debts and reveal a debtor's unfavorable repayment history.
What is the Limit for Garnishing Wages?
The amount of wages that may be withheld from an individual is outlined in the Consumer Credit Protection Act. The lower of the following is the garnishment amount:
25% of weekly disposable income if the person's weekly income is higher than $290.
Wages exceed $7.25 x 30, which is $217.50 or thirty times the minimum weekly salary.
Wage garnishment is not applied to people with disposable income under $217.50 per week. Any amount above $217.50 a person receives in disposable income each week (between $217.50 and $290) may be garnished. A maximum of 25 percent of weekly disposable income over $290 may be garnished.
How to Stop Wage Garnishment Once it Starts?
Bankruptcy may seem to be your only option if your wages are garnished. Thoughts like this are widespread, but they are not accurate. You can try to stop a creditor from garnishing your wages by taking a few steps.
1. Look up the Laws in your State
Some states provide defenses against wage garnishment. For instance, you can ask the court to appoint a trustee if you reside in Ohio. You will be making payments to this individual. The money you have given them will then be distributed to your creditors by this person. It streamlines the procedure and prevents wage garnishment from happening. If you live elsewhere, you must contact the county court clerk to find out what options are available there.
2. Answer to the Demand Letter
Before starting to garnish your wages, a creditor will typically send you one more letter if they have won a judgment against you. The majority of states have laws requiring what is known as a demand letter. You should not disregard a demand letter that you receive from a creditor. It is because creditors would rather receive voluntary payments than deal with the costly paperwork and collection procedures accompanying garnishment. Your best chance of stopping the garnishment procedure is to use this time to create a payment plan.
3. Object to the Garnishment
The garnishment will probably proceed if you receive a demand letter and disregard it. Instead, try to object to the garnishment with a formal, legal notice. Request a hearing from the court and, if applicable, raise one of the following objections:
The creditor is overcharging
You already paid the creditor
The creditor is not following the correct procedures
4. Seek Help from CCS
Consumer Credit Counseling Services (CCS) is a non-profit organization that may be able to assist you in stopping garnishment. You can negotiate a deal and pay it off over time with the aid of this service. Your creditors cannot request that your wages be garnished while you are enrolled in one of these programs because they will agree to participate in it with you.
5. Never Give Up Negotiating
Debt collectors and creditors won't work harder than necessary on your case. There is still time to try to negotiate a settlement even after a garnishment has begun. You can prevent the garnishment by exerting pressure and attempting to negotiate. If your circumstances change, explaining them is always a good idea whether you can settle the remaining debt or use your extra cash to pay off a portion of the judgment in full, halting the garnishment.
6. File a Bankruptcy
Bankruptcy should be your absolute last resort. Even though this will immediately stop most garnishments, it will follow you for the rest of your life and make it challenging to repair your credit.
What Is the Time Frame for Garnishing Wages?
Your bank and employer may be garnished anywhere from five to thirty business days after receiving court-ordered letters, depending on the creditor and the state where you reside. The garnishment will continue until the amount is paid in full, including the interest and fees associated with the court case.
What is a Garnishment Processing Fee?
According to federal law, a creditor who has obtained a judgment against an employee may garnish up to 25% of that employee's disposable income. It is occasionally acceptable for an employer to charge the employee or the creditor a fee for handling the garnishment. It is known as the garnishment processing fee.
Suppose a person has financial difficulties due to garnishment. In that case, they may be eligible to submit a claim to reduce the amount.