If you are like most hard working American taxpayers, then you probably feel like there is already way too much being taken out of your pay check. One look at your pay check and you’ll see the bite taken out by a failing social security fund that likely will be exhausted before younger taxpayers ever have a chance to withdraw from it. You’ll also see increased Medicaid and Medicare taxes that seem to chip away at your pay check more and more each year. While these deductions are seemingly inescapable, there is one deduction you’ll want to avoid and is within your power to do so: wage garnishment. Wage garnishment is not a tax by any means, but it is a court ordered deduction that can eat away at your income if you are not vigilant about meeting your financial hardships head on. There is some misinformation and general misconceptions about wage garnishment that should be cleared up. While nobody wants to see more hard earned money come out of his or her pay check, it is important to know when you are at risk for wage garnishment and the laws associated with such an act.
What is wage garnishment and when is it used?
In short, wage garnishment is a last resort tool that creditors may use to pay back outstanding debts. Many people carry the misconception that wage garnishment is only available when someone is behind in child support or alimony. While it is used to recover money owed from one spouse or parent to another, wage garnishment can apply to many other situations. It is also used in recovering debts not readily paid back such as credit card debt, student loans, unpaid income taxes, large medical bills, and court judgements against you. What percentage of your pay check that can legally be garnered depends on what kind of debt is owed. It can be as little as 15% of your disposable earnings or as high as 60% in some cases of alimony or child support. In many states, wage garnishment can only be enacted by a court order where a judgement rules that money is owed. Simply put, creditors cannot just garnish your wages; they must first sue you and gain a favourable ruling before such action is taken.
What can you do to avoid wage garnishment?
Nobody wants to see additional income taken out of his or her pay check, but the effects of wage garnishment go far beyond just the financials. For most people facing wage garnishment, the process can be embarrassing now that their company is now aware of their financials. The trouble goes even further however when there are multiple judgments against you requiring garnishment. It is unlawful for an employer to fire you for having your wages garnished, protection from this result diminishes as other judgements are levied against you. The most effective way to avoid these unfortunate outcomes is to stay on top of your financial problems instead of running from them. It is easy to bury your head in the sand when bills begin to mount. Of course hiding from these problems do not make them go away, they usually make the problems exponentially worse. Most debt collection entities would prefer to avoid legal costs associated with suing you for outstanding debt. Often, just getting the lines of communication open and coming up with a repayment plan (and sticking to it) is the easiest way to avoid wage garnishment. Just remember to get any agreed upon terms in writing in the event the debt collection entity looks to alter the deal down the road. If you do not communicate with your creditors and bury your head in the sand, it leaves them with no other course of action but to sue. The problem will always get messier when the courts are involved. Sometimes financial hardship is unavoidable, however keeping other hands out of your pay check is almost always attainable. All it takes is a little extra time on your part devoted to communication with your creditors and figuring out a plan that works for both parties.
Brian Levesque is a graduate student at University of Miami School of Law. He sometimes writes articles about financial, family, and other forms of law to help make ends meet. For those who need immediate legal council pertaining to bankruptcy, or wage garnishment due to child support or alimony payments, he highly recommends the Law Offices of Peggy-Cruz Townsend.