Various federal, state, and local agencies have offered financial relief during the COVID-19 global pandemic. For example, New York announced it would cease collection of state-owned medical and student debt for 30 days.1 In California, there’s now a 90-day grace period for mortgage payments and a moratorium on initiating foreclosure sales or evictions.2 But for anyone facing economic hardship, one thing that remains unchanged is wage garnishments.
For the most part, novel coronavirus is having no effect on court-issued garnishments. This can have a profound impact on the one in six Americans with an unpaid medical bill in their credit report,3 and the 530,000 who file for bankruptcy with medical debt as a contributing factor.4
You can still face wage withholdings if you owe:
- Child Support: The U.S. Department of Health and Human Services has confirmed all child support orders are still in effect. Its Electronic Income Withholding Orders system is still active. Child support payments are still being processed at the federal and state level.
- Creditors: Whether creditors can pursue collections activities such as wage garnishment depends on the state. In some locations, courts have ordered temporary halts of such activities, but in most jurisdictions, creditor garnishments haven’t been addressed.
Federal Student Loan vs Private Student Loan Garnishments
If you owe federal student loans, garnishments have been put on hold for at least 60 days, and interest is now at 0%. The CARES Act passed by Congress in March also instructs private lenders to halt collections. Most private student loan lenders are allowing borrowers to pause their payments if they’ve experienced financial difficulties due to the virus.
Tax Debt/Tax Levies
The IRS has announced that liens and levies are suspended, which includes systematic ones and those initiated by field revenue officers. However, getting releases for an IRS tax levy is difficult because the agency has reduced staff at its call centers. Call volumes and wait times are high. In some states, tax collections have been paused altogether, but how tax levies are dealt with varies by jurisdiction.
The Battle to Suspend Debt Collection
The move to suspend enforced collection methods hasn’t been accepted by all in the debt collection industry. The Association of Credit and Collection Professionals, a lobby group, has criticized the move, arguing that debt collection is more important than ever. It suggested that recent federal measures could negatively impact the diverse workforce of collection agencies and that consumers would have less options and information on how to address their obligations.
How this Impacts Your Employer’s Duty
The government won’t withhold part of your tax return or Social Security payment. If wage orders for garnishment were in place before, you’ll now be entitled to your full wage. However, your employer must make the appropriate changes when issuing your paycheck. It cannot ignore its duty to process wage garnishments because the company can become liable for your entire debt. If child support and other court-issued garnishments apply, your employer may receive electronic notices or mail.
Companies must also maintain their employer payroll system in regard to collecting and responding to garnishments. It’s also important to be aware of how different types of wage withholdings are affected or unchanged during the pandemic.
Contact OakTree Law for Help
Whether the wage garnishment obligations of you or your business have been impacted or unaffected by COVID-19-related changes in collections, OakTree Law can help navigate the complex battlefield. We assist clients in dealing with creditor, payroll, and student loan garnishments. No matter what kind of debt relief you need during this difficult time, you can count on our Los Angeles bankruptcy attorneys for help, so call 562-219-2979 today.