Being in debt can be a scary place -- especially when a creditor starts taking a piece of your paycheck. In some cases, creditors could be taking so much you can no longer afford to pay other bills, sending you deeper into debt.
It turns out you may have some options if you need to end or alter wage garnishment, including filing for an exemption or getting the debt vacated entirely.
Wage Garnishment Basics
Wage garnishment is generally reserved for severe cases or government-imposed judgments like child support, federal student loans, or tax debts.
A creditor, including the government, can garnish your wages if you have a significant amount of unpaid debt. The process normally entails the creditor getting a legal judgment in court. Then a portion of your wages may be withheld to pay the debt. Because of this process, you must be notified of the impending court proceedings, and you will have the opportunity to contest the debt.
Fortunately, there are legal limits to how much your wages can be garnished. The federal Consumer Credit Protection Act (CCPA) caps garnishments sought in federal court at 25 percent of the debtor's disposable income each week. (Although, if the garnishment is for owed child support, the limit could be as high as 60 percent of disposable income.)
"Disposable income" in this case means all of your income after taxes, even if it's from multiple jobs or investments. This doesn't include deductions for other daily bills and payments like rent, food, and health insurance, and that's when wage garnishment can get burdensome.
Exemptions From Wage Garnishment
If you are unable to afford basic living expenses due to wage garnishment, you may be able to file a claim of exemption. Most states have a "head of household" exemption if you provide more than half of the support for a child or other dependant.
It's also possible that state interest rate laws could cap wage garnishment at anywhere from 15 to 25 percent. In some states, the limits of wage garnishment are more consumer-friendly than federal protections, and you should check with your state laws to know for sure.
In other cases, states have income-based exemptions which limit garnishments for those making under a certain amount, and only allow garnishment of earnings above that threshold. Additionally, most debtors cannot garnish Social Security or disability benefits. If a creditor has seized benefits to repay a
debt, you may be able to recoup those benefits by filing for an exemption. (Note that the government may be able to garnish Social Security benefits for unpaid court-ordered child support.)
The eligibility and filing process for garnishment exemptions may vary by state. Some states, like California. Florida. and Virginia. provide forms online, but you may need to visit a court clerk's office to get exemption forms and instructions for filing. Once you have filed for the exemption, the court will likely set a date for a hearing, during which you can provide evidence (i.e. proof of income, bank account records, and bills) of your inability to pay your living expenses.
Wage Garnishment and Bankruptcy
In extreme cases of debt, filing for bankruptcy will terminate wage garnishment. Once you file for bankruptcy, an automatic stay will end your wage garnishment, although you may have to alert the clerk of court and the creditor of the bankruptcy filing.
While filing for Chapter 7 bankruptcy will discharge most debts and wage garnishments, there are some debts that remain after a Chapter 7 discharge. including:
- Child support and spousal maintenance (alimony)
- Most federal student loans
- Recent federal, state, and local taxes
- Government-imposed restitution, fines, and penalties
- Court fees
So after the bankruptcy, it is possible that your wages could be garnished again if debts like these remain.
If your debts are business-related, you could file for Chapter 13 bankruptcy. A Chapter 13 filing will place a similar hold on wage garnishment, but a repayment plan may require you to repay some debt from your wages.
Vacating a Judgment
As noted above, a creditor will require a legal judgment in order to garnish your wages, and there are some ways to vacate, or set aside, the judgment. If you think either the debt or the judgment are improper, you can file a motion to vacate the judgment and list the reasons why the judgment is invalid.
You should be aware, however, that courts will only vacate judgments under certain specific circumstances, and even if the judgment is vacated, the debt may still remain. Therefore, your wages may be garnished again.
Wage garnishment is a serious matter, and dealing with creditors and the courts can be complicated. If your wages are being garnished or you're considering bankruptcy, an experienced bankruptcy attorney may be able to help.