Wage garnishments are the ultimate threat posed by every debt collection scenario, but finding yourself on the wrong end of one doesn’t have to be a financial death sentence.
The whole process can start with something as simple as falling behind on a few credit cards, and the next thing you know, you can’t make ends meet, and the collections calls start coming. Legal notices soon follow, along with a court judgment taking a big chunk of your paycheck.
The best way to avoid or resolve a wage garnishment from a collection situation is to start by understanding everything you can about the problem, which is taking a big chunk out of your regular paycheck.
How Wage Garnishments Work
Wage garnishments result from a legal process used by creditors to collect debts by helping themselves to a portion of the debtor’s regular paycheck. This can be done legally by obtaining a court order.
Wage garnishments are put into place to recover unpaid taxes, outstanding child support, student loans, court judgments, or unpaid bills.
The first step in implementing a wage garnishment is for the collection agent to obtain a judgment against the debtor. From there, they can notify the employer through a “writ of garnishment” and calculate the amount to be withheld, which varies from state to state.
While the total amount of a wage garnishment can vary in different states, federal law states that the maximum wage garnishment is 25% of disposable income or an amount by which disposable income exceeds 30 times the federal minimum wage, whichever is less.
In situations where multiple judgments exist, the total of all garnishments cannot exceed the federal maximum.
It’s also important to note that some types of special income, like social security and disability, are exempt from wage garnishments.
Impact of Wage Garnishments
The most notable impact of any wage garnishment is the obvious financial loss from that money no longer being in the debtor’s paycheck. This can make it even harder to make ends meet, considering most garnishments result from already strained finances.
Wage garnishments can also impact credit scores indirectly, as any accounts that go so far into collections that a judgment is obtained will likely be reflected on the debtor’s credit report.
As if those factors are concerning enough, wage garnishments frequently come with court costs and legal fees. Then there is the general embarrassment of the HR department at work knowing about the debtor’s situation.
Resolving a Wage Garnishment
The easiest way to resolve a wage garnishment is to pay off the outstanding balance in full, but if that were possible, the debtor likely would have done so well before things reached the point of a judgment and wage garnishment.
Once the wage garnishment is in place, a debtor can still negotiate with the collection agent to set up a repayment plan. They can also challenge the garnishment but need legal grounds to do so.
The only alternative resolutions to consider are filing for bankruptcy, seeking legal advice, or financial counseling.
The best way to deal with a wage garnishment is to avoid putting yourself in the position to deal with one in the first place. Stay on top of your finances and seek professional advice well before you need it.
If you need to catch up, try to work with collection agents. In most cases, they want to work something out to settle a debt just as much as you do.
