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. Note that non-governmental entities like collection companies and credit card companies cannot obtain a wage garnishment order unless they have obtained a court judgment against you.
While wage garnishment should be avoided at all costs, 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. Those companies know that it is more of a "wake up" tool for most. Many times lawsuits and judgments go unnoticed.
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, consumer debt is at an all time high in the United States.
If your debts are left unacknowledged, or have progressed beyond the stages of negotiating an installment plan, an 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 you can prove to a judge that the amount being seized exceeds a reasonable or even legal amount. If no other options remain, a Chapter 7 bankruptcy filing will stop any wage garnishment and may even discharge the original debt. Attempting to settle the debt while a wage garnishment is in effect is often a fruitless endeavor because the creditor has little incentive to negotiate - why negotiate when they can just sit back and collect 25% of your wages?
It goes without saying that debt doesn’t go away by ignoring it. While the stress of mounting debt is undeniable, ignoring your debts it can actually make it 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! Arietta 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. Note that any reduction in debt settlements may result in you paying more income taxes at the end of the year.
- Student Loan Debt – Student loan collection practices can prove to be some of the most ruthless of debt collection efforts. Most debtors cannot discharge or ‘wipe-out’ student loan debt by filing for bankruptcy. Note however that there are some new procedures in place in bankruptcy court to allow certain debtors who qualify to substantially lower their student loan debt through bankruptcy. Contact David A. Arietta, Esq. for more details.
- Tax Debt & Tax Levies – The Federal Government and IRS can garnish your wages without a court order. The IRS takes into consideration how many dependents you have before setting a garnishment rate. The California Franchise Tax Board 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 can result in significant garnishments of your disposable income depending on whether or not a former spouse is supporting another child or other dependent.
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 |
| 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. |
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 of your assets can be exempted with proper planning before the case is filed. What debts will remain and what debts will be simply "wiped out" need to be explored. Arietta Law has a staff 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. Note that lump sum settlements amounts can vary drastically and that any reduction of debt settlement could expose you to more income taxes at the end of the year.
- 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 on the local Superior Court websites.
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 Walnut Creek 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 david a. arietta, esq. 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 a knowledgeable wage garnishment attorney at Arietta Law today: (925) 472-8000