How common do you think wage garnishment is? You’d definitely be surprised at the true answer. 10% of Americans between the ages of 35 and 44 have their wages garnished every year.
The most common reason for wage garnishment is the failure to pay child support. Student loan debt and medical bills are also high up on the list. If your creditor has threatened to start garnishing wages, the good news is that there is a way out.
In this article, we’ll discuss how to prevent having your wage garnished so you can control your financial freedom.
What is Wage Garnishment?
Wage garnishment is a legal process in which a creditor can collect money from your paycheck. The creditor will work with your employer to have a certain amount of money taken out of each paycheck until the debt is paid off.
For example, let’s say you owe $1,000 to your credit card company. If they garnish your wages, they may take $50 out of each paycheck until the debt is paid off.
While wage garnishment is a way for creditors to get the money they’re owed, it can also be very stressful for the person who has their wages garnished.
If you’re struggling to make ends meet and then have a portion of your paycheck taken away, it can be difficult to stay afloat. That’s why it’s important to know how to stop wage garnishment before it starts.
Is Wage Garnishment Legal?
The short answer to this question is yes. Wage garnishment is a legal process that creditors can use to collect money from debtors.
However, there are certain rules and regulations that must be followed in order for wage garnishment to take place.
For example, the creditor must first send you a notice of their intention to garnish your wages. This notice will include information about the debt you owe and how much they intend to garnish from each paycheck.
You’ll also be given an opportunity to dispute the wage garnishment or come up with an alternative payment plan. If you do nothing after receiving this notice, the creditor can then proceed with wage garnishment.
How Much Money Can the Creditor Take?
The amount of money the creditor can garnish from your paycheck will depend on a few factors, including the type of debt you owe and your state’s laws.
In most cases, creditors are only able to garnish a certain percentage of your disposable income. Disposable income is the amount of money you have left after taxes and other mandatory deductions have been taken out of your paycheck.
For example, if you earn $2,000 per month and are required to pay $500 in taxes, your disposable income would be $1,500.
In most states, creditors are only able to garnish up to 25% of your disposable income. So, if you have a disposable income of $1,500, the creditor could garnish up to $375 from your paycheck.
However, there are some exceptions to this rule. For example, if you owe child support or back taxes, the creditor may be able to garnish up to 50% of your disposable income.
Negotiate With the Creditor to Prevent Them From Garnishing Wages
The best way to prevent wage garnishment is to negotiate with the creditor before it starts.
If you’re struggling to make payments on your debt, reach out to the creditor and explain your situation. Many creditors are willing to work with you to create a payment plan that’s more affordable.
You may also be able to negotiate a lower interest rate or agree to pay off the debt in full over time. If you can come up with an alternative payment plan that works for both parties, be sure to get it in writing.
This will protect you from wage garnishment down the road if you’re unable to make payments as agreed.
File for an Objection with the Court if Your Debts are Due to Fraud
If your debts are the result of fraud, you may be able to file an objection with the court.
For example, if you didn’t actually receive the goods or services you’re being charged for, you may be able to dispute the debt.
You’ll need to provide evidence of the fraud to the court and explain why you shouldn’t have to pay the debt. If the court agrees, they may order the creditor to stop garnishing your wages.
File for Bankruptcy to Avoid Wage Garnishment
Filing for bankruptcy is a last resort, but it may be the only way to protect your wages from garnishment.
When you file for bankruptcy, an automatic stay goes into effect. This means that creditors are not allowed to take any collection actions against you, including wage garnishment.
However, there are some exceptions to this rule. For example, if you owe child support or back taxes, the creditor may still be able to garnish your wages even after you’ve filed for bankruptcy.
If you’re considering filing for bankruptcy, it’s important to speak with an attorney first. They can help you determine if it’s the right option for your unique situation.
With that said, here are the two common types of bankruptcy:
Chapter 7 Bankruptcy
Chapter seven bankruptcy is also known as liquidation bankruptcy. This type of bankruptcy allows you to discharge most unsecured debts, such as credit card debt and medical bills.
To qualify for Chapter seven bankruptcy, you’ll need to pass a means test. This test looks at your income and expenses to see if you’re eligible, according to IVAAdviceOnline.
If your income is below the median income in your state, you’ll automatically qualify. If it’s above the median, you’ll need to provide proof that you don’t have the disposable income to repay your debts.
Chapter 13 Bankruptcy
Chapter thirteen bankruptcy is also known as reorganization bankruptcy. This type of bankruptcy allows you to keep all of your assets, such as your home and car.
With Chapter thirteen bankruptcy, you’ll need to develop a repayment plan to repay your debts over time. This repayment plan will last for three to five years. During this time, you’ll make payments to a bankruptcy trustee who will then distribute the funds to your creditors.
Learn More Financial Tips
When a creditor is garnishing your wages, you can feel the overwhelming pressure of your mortgage, car payments and other bills piling up. If you follow the tips above, you can stop this garnishing wages and work out an agreement.
With that said, do you want to learn more helpful financial tips? If so, check out our blog.