Managing overwhelming debt can be an incredibly stressful experience, particularly when confronted with the possibility of wage garnishment. Wage garnishments occur when a court order is sent to your employer instructing them to withhold a certain percentage of your income and send it directly to your creditor.
Unfortunately, wage-garnishment orders usually do not consider your financial situation or ability to pay.
This can make the financial difficulties that led to the garnishment even worse. As debt continues to pile up and become unmanageable, filing for bankruptcy may be the best option for taking back control of your finances.
Garnishment Limits
The specific amount that can be deducted from your income through wage garnishment is subject to federal and state laws, which typically depend on the type of debt you owe. Here are some commonly observed wage garnishment laws in different jurisdictions.
Some states have even stricter limitations on consumer-debt garnishments, setting the maximum allowable amount as low as 15 percent of net income.
Under federal child support laws, enforcement agencies have the authority to garnish a significant portion of an individual’s income, typically around 50 to 60 percent. Some states impose additional restrictions on child support garnishments, sometimes limiting them to 25 percent of net income.
IRS wage garnishments are calculated by taking into account the taxpayer’s exemptions. This can often result in garnishments of 50 percent or more of their income.
Legal Requirements for Employers
Under federal law, employers are required to follow wage garnishment orders and cannot terminate employees solely due to a single order. However, if an employee has multiple garnishment orders, employers may have the right to end their employment.
Having just one wage garnishment order can quickly cause financial turmoil for the debtor, and if multiple orders are issued, it can completely derail their career and make repaying the debt impossible.
That’s why it is crucial to take preventive measures to avoid wage garnishments from happening in the first place. And if they have already been initiated, seeking their prompt removal becomes imperative.
Steps to Lift Wage Garnishments
Wage garnishments rarely catch debtors off guard. Typically, debtors are aware when they are on the verge of facing garnishment. By taking action before a court issues a garnishment order, individuals can save themselves money, time, and anxiety.
An effective strategy is to negotiate payment arrangements with creditors before they enforce garnishment orders. Creditors often encounter debtors who lack funds, making the judgment irrelevant. In these cases, creditors commonly resort to wage garnishment for accessing income. However, many prefer to accept payment arrangements that allow them to collect without engaging in legal processes.
The Role of Bankruptcy
When it becomes impossible to make payment arrangements, bankruptcy often becomes the preferred choice. Bankruptcy is necessary when the amount of debt is so high that the debtor can’t afford to make installment agreements with all creditors or when creditors demand unreasonable terms, such as rejecting a payment plan and pursuing wage garnishment for the debt, including interest, penalties, and legal fees.
Filing for Chapter 7 bankruptcy provides the opportunity to have all consumer debts discharged, including credit card balances, car loans, mortgage debt, and judgments related to mortgage deficiency. Conversely, individuals who wish to hold on to non-exempt assets may choose Chapter 13 bankruptcy instead. This option allows for reduced payments over a period of three to five years through a repayment plan.
Filing for bankruptcy can offer some protection against creditors who are trying to garnish your wages. It can nullify existing garnishment orders and provide relief from other debts. However, it’s important to understand that certain debts like student loans, tax debt, and child support cannot be discharged in bankruptcy.
Creditors may still be able to continue pursuing wage garnishment for these specific debts even after filing for bankruptcy.
It’s worth noting that while bankruptcy doesn’t directly stop existing wage garnishments for non-dischargeable debts, it can indirectly help by eliminating other consumer debts, which allows you to free up income to address the non-dischargeable ones.
Talk to a Bankruptcy Lawyer
Every year, countless households are devastated by wage garnishments. When consumer debt becomes overwhelming and creditors start pursuing or obtain wage garnishment orders, seeking advice from a bankruptcy attorney is a wise decision to safeguard your financial future.
Stop garnishment before it happens and reach out to us here at Hines Law. Our Massachusetts bankruptcy law firm has several locations throughout the greater Boston area and has been helping people overwhelmed with debt find a solution. We specialize in Chapter 7 and Chapter 13 cases and assist in structuring a financial plan to get you back on your feet. If you are ready to move away from crippling debt, call and speak to an experienced bankruptcy attorney, Free.