Wage garnishment is a leading reason a person reaches out to a bankruptcy attorney. When we are at the point where a typical unsecured Creditor, such as credit card, can garnish wages, it means a person has already been sued, lost or didn’t answer. At this point a creditor will obtain a judgment and then begin collection efforts.
A creditor with a judgment can either try to seize your bank account or personal property or will garnish your wages through an income execution. The problem here is that obviously every penny of that paycheck is usually needed for living expenses – which is often why a person fell into debt in the first place.
The good news is that luckily there are federal and state limits on what a creditor can and cannot do.
If you receive a notice from the sheriff regarding an income execution, you need to know that a creditor cannot simply take all of your paycheck. In fact, they can take very little. In most cases, the amount will be capped at 10% of your Gross (Before Taxes) wages.
This is still often money a debtor cannot afford, but you are at least left with 90% of your Gross wages – no matter how many different creditors obtain judgments. This will, at the least, either allow you to pay off the debt or seriously consider whether bankruptcy is the right option.
This 10% limit applies to the typical unsecured creditor, such as a credit card. Wage garnishment for certain other types of debts can be much higher. For example, child support, can garnish up to 60%. Student loans can garnish up to 15% of your disposable income. Taxes will depend on how many dependents. Unfortunately, with taxes, the government does not require a judgment, so this can happen a lot more quickly.
For most people, they are dealing with a wage garnishment due to an unpaid credit card or other unsecured loan. These are fortunately capped at 10% of your gross pay.
This 10% garnishment also only applies to non-exempt income. For most people this will simply be their paycheck. There are additional protections for those who receive special types of exempt income. The following are just some examples of exempt income that CANNOT be garnished AT ALL:
Social security or social security disability, unemployment compensation, spousal support, disability payments, and public assistance.
The best thing to do to avoid wage garnishment from an unsecured creditor is to contact an attorney BEFORE you are served with a summons or immediately after. This will give you time to either defend the action or file a bankruptcy petition to potentially discharge the debt BEFORE the creditor can obtain a judgment.
If you are currently in a situation where you are dealing with a potential wage garnishment, you can contact Frank J. LaPerch, PC for information about what you can do to get your financial life back in order.