What Is Wage Garnishment?
Wage garnishment occurs when creditors or a government agency orders your employer to deduct a specified amount from your paycheck to pay back debts. Many types of debt can result in wage garnishment, including credit card debt, lease defaults, tax debt and student loan debt. Though every case is unique, the fact remains that the courts set the terms of wage garnishment.
While I wage garnishment should be avoided at all costs, federal and California law affords you some protections. You cannot be fired by your employer the first time your wages are garnished. No more than 25% of your wages, after taxes, can be garnished either.
Having your wages garnished can be devastating, especially if it is unexpected. Almost instantly, the money that one relies on to survive is greatly diminished. This can come as a significant blow to those that live paycheck-to-paycheck.
Wage garnishment can be a crippling way to repay debts, but sadly it is a reality for some. When you get in over your head and are facing significant debt, wage garnishment may be a last ditch strategy for creditors, financial institutions, or government agencies to recoup monies owed to them.
Suddenly, money that is desperately needed is automatically removed. Now a significant portion of your disposable income is missing each month. Your credit is being severely damaged, and your employer has been made aware of your financial struggles.
Do NOT Ignore Debt or Payment Plans
Unfortunately, debt seems to be on the rise in the United States. Americans now hold higher overall debt than previous spikes seen before the 2008 financial crisis. The Federal Reserve Bank of New York issued its Quarterly Report on Household Debt and Credit, which shows that total household debt increased by $32 billion (0.2%) to $13.54 trillion in the last quarter of 2018.
If your debts are left unacknowledged, or have progressed beyond the stages of negotiating an installment plan, a Los Angeles wage garnishment attorney may be needed. A wage garnishment attorney can contact your creditor and open a new channel of communication. An exemption can be filed so that your attorney can prove to a judge that the amount being seized exceeds a reasonable or even legal amount. And if no other options remain, a Chapter 7 bankruptcy filing will stop any wage garnishment and may even discharge the original debt.
It goes without saying that debt doesn’t go away by ignoring it. While the stress of mounting debt is undeniable, by ignoring your debts it can actually make it much much worse. There are a number of steps that you can take to avoid wage garnishment, which we will discuss below.
Act early to avoid getting your wage garnished. At the very least, a reduced payment plan may be worked out by contacting your creditors. If you were proactive and have opted to set up a payment plan with your creditor, the courts or IRS, then good on you! OakTree Law strongly recommends that you stay on-top of these installments to avoid wage garnishment.
Types of Wage Garnishments
- Credit Card Debt – No one really plans to go into credit card debt, but it seems to be a pretty common pitfall for most Americans. Fortunately, creditors are typically receptive to working with take-charge debtors to set up payment plans, or even negotiating a reduced settlement amount to close out your debt all at once.
- Student Loan Debt – Student loan collection practices can prove to be some of the most ruthless of debt collection efforts. It is common knowledge that most debtors cannot discharge or ‘wipe-out’ student loan debt by filing for bankruptcy. Although there are some exceptions, it is highly unlikely that your student loan will be forgiven. But if you can prove that repaying your student loan would cause you undue hardship, you may be able to get rid of your student loan through the process of bankruptcy. In 2018, Forbes reported that total student loan debt in the United States was $1.52 trillion, with a staggering 44.2 million citizens owing debt. Student loans are some of the most unforgiving and can be truly debilitating.
- Tax Debt & Tax Levies – Without obtaining a court order, the Federal Government and IRS can garnish your wages. The IRS takes into consideration how many dependents you have before setting a garnishment rate. In the state of California and owe back taxes, they can garnish up to 25% of your net pay or disposable income to satisfy unpaid tax obligations.
- Unpaid Child Support – Not paying your child support is frowned upon by the courts. That translates into aggressive garnishment percentages. Employers can be prompted to garnish up to 50-65% of your disposable income depending on whether or not a former spouse is supporting another child or other dependent. What’s more is that your employer will be sent a certified letter that outlines why your wages are being garnished, which can be especially embarrassing given the circumstances. It is always advised that you can and should dispute the garnishment amount if you feel your income wasn’t correctly logged, if you are unemployed or you are facing other hardships.
How Much of Your Wages Can Be Garnished?
Garnishments are mainly based on ‘disposable income’. Simply put, your disposable personal income (DPI), also referred to as net pay, is the money leftover from your paycheck after you’ve paid federal, state and local taxes, Social Security, and unemployment insurance. Voluntary deductions, such as health and life insurance, are exempt and not included.
|Types of Debt||Weekly % of disposable income that can be garnished|
|Credit cards, medical debt, personal loans, and consumer debts||25% of your disposable income – or – the amount by which an employee’s disposable earnings are greater than 30x the federal minimum wage (currently $7.25 an hour).|
|Child support wage garnishment||60% – or- 50% if you are supporting another child or spouse.
*If you are delinquent for more than 12 weeks, an additional 5% may be garnished*
|Federal student loans||Up to 15% of your disposable income|
|Taxes||Typically up to 15%. The IRS will consider the number of dependants you have when making this decision.
*Consider an IRS Offer in Compromise to dispute, pay down or ‘wipe-out’ tax debt*
How to Stop Wage Garnishments?
Your first line of defense is to get educated on wage garnishment guidelines and familiarize yourself with the terms, types and percentage amounts.
- Understanding wage garnishment guidelines. Creditors can’t typically garnish your wages until they have obtained a court order. This means that a creditor will have to file a lawsuit against you, and go through the court system to collect their debt out of your paycheck. There are rare exceptions to the rule that will allow garnishment without a court order. Those are unpaid income taxes, child support and student loan debt.
- Bankruptcy. The term ‘bankruptcy’ makes most people shudder, but it may be a very viable solution. While it sounds intimidating, sometimes filing for bankruptcy to forgive debt and stop wage garnishment is the only prudent move. It is important to fully understand the weight of filing for bankruptcy. Bankruptcy may afford you a clean slate, but it isn’t without its obstacles. During most bankruptcy proceedings, most, if not all, of your assets will be liquidated to pay off creditors. The terms vary as to what debts will be paid off and what debts will be simply ‘wiped out’. OakTree has a staff of experienced Los Angeles bankruptcy attorneys to help walk you through the process and explain the pros and cons to you.
- Working With Your Creditor. As stated before, most creditors would prefer to avoid a lengthy court process to get paid the money they are owed. Creditors would much rather start collecting payments, however small, immediately. This is an ideal position to be in when you are trying to negotiate a payment plan or get a lower lump-sum payment to forgive your debt in its entirety. Be kind, be forthcoming and reason with them to come to a suitable bottom line that everyone can live with.
- File an Exemption Claim. If you reside in the state of California, you may have some additional ammunition to avoid wage garnishment proceedings. If you feel like you can prove that the wage garnishment would negatively impact your household and make it impossible to provide basic necessities for your family, then you should file a claim of exemption in California to stop the garnishment proceedings. The claim of exemptions form for the state of California can be found here: California Claim of Exemption for Wage Garnishment
Examples of Wage Garnishment
Consider Linda Brice, a Los Angeles school teacher. Her case was profiled by Bloomberg News in 2012. Ms. Brice is a first-grade teacher, a veteran of the Coast Guard and a single mother. Because of a 30-year old student loan that she defaulted on, lawyers seized $900 a month from her paychecks.
She pleaded for a lower rate, but was instead harassed by the law firm’s collection department supervisor, who told her to give up her car since the firm would do whatever was deemed necessary. “We’re going to go after your bank account. We’re going to go after your salary. We’re going to after your personal belongings,” she was told.
Without a Los Angeles wage garnishment attorney, Ms. Brice took her case before the chief judge of the US District Court for the Central District of California. The judge ruled that Ms. Brice could afford a payment of $25 a month in order to meet her cost of living. But the law firm promptly seized $2496 from Ms. Brice’s bank account and an additional $918 from her next paycheck.
Student loan cases are unique since it is rare that this type of debt will ever be discharged. It would be next to impossible to stop wage garnishment in California or any other state due to a student loan. What’s relatable to others are the severe terms imposed on her and the law firm’s disregard for the court order.
Federal prosecutors often use private law firms to retrieve payments. It’s likely these attorneys will insist on steep wage garnishments. Credit card companies and other private entities will eventually sell your debt to a collection agency. Hence, a wage garnishment attorney can be an important ally.
Know Your Rights!
State and federal laws provide protections to employees that are going through wage garnishment proceedings. Some employers may find wage garnishment orders to be a hassle and think that terminating your employment is an easier option. That would be against the law.
Under federal law, you cannot be terminated if you are facing one wage garnishment issue. However, if you are facing more than one wage garnishment order, you may be subject to discharge.
A Los Angeles wage garnishment attorney can contact your creditor, employer, the IRS or even the opposing attorney to open a new channel of communication. An exemption can be filed so that your attorney can prove to a judge that the amount being seized exceeds a reasonable or even legal amount. And if no other options remain, a Chapter 7 bankruptcy filing will stop any wage garnishment and may even discharge the original debt.
Contact OakTree Law for Your Wage Garnishment Claims
If you feel you are being unjustly targeted by a wage garnishment claim or you are facing undue repercussions stemming from a wage garnishment claim, it is important to contact the knowledgeable wage garnishment attorneys at OakTree Law today: (562) 219-2979