Wage garnishment: What is it and how to avoid it?
Stay on top of your finances to avoid this worst-case scenario.
Finding out that you’re in an excessive amount of debt that you can’t afford to pay off can be disheartening. However, finding out that part of your wages are being withheld from you and going straight to the creditor or person you owe money to, can be even harder. That’s what wage garnishment is.
According to the U.S. Department of Labor, “Wage garnishment is a legal procedure in which a person’s earnings are required by court order to be withheld by an employer for the payment of a debt such as child support. Title III of the Consumer Credit Protection Act (CCPA) prohibits an employer from discharging an employee whose earnings have been subject to garnishment for any one debt, regardless of the number of levies made or proceedings brought to collect it.”
Here are the most common questions we get regarding wage garnishment and how can it be avoided:
Question: Why does wage garnishment happen?
Answer: According to this nerdwallet.com article, garnishment often happens when a creditor sues you for nonpayment of a debt and wins in court. Sometimes, though, a creditor can force garnishment without a court order, for instance, if you owe child support, back taxes or a balance on federal student loans.
Q: How common is wage garnishment?
A: This report by Automatic Data Processing (ADP) Inc. shows that, unfortunately, wage garnishments are more common than you might think. The ADP found that 7.2% of the 13 million employees it assessed had wages garnished in 2013. For workers ages 35 to 44, the number hit 10.5%. The top reasons? Child support; consumer debts and student loans; and tax liens.
Q: What are the two types of garnishment?
A: There are two types of garnishment: wage and non-wage. When it comes to wage garnishment, creditors can legally require your employer to hand over part of your earnings to pay off your debts. In non-wage garnishment, commonly referred to as a bank levy, creditors can tap into your bank account.
Q: When does the garnishment end?
A: Once you receive legal notice, the court will send notices to you and your bank or employer, and the garnishment will begin in five to 30 business days, depending on your creditor and state. The garnishment continues until the debt, potentially including court fees and interest, is paid.
If you have the option, you can borrow money from someone you know or take out a personal loan and pay off the entire sum at once. Click here to see how to pre-qualify for a personal loan.
Q: How much of my wages can be garnished?
A: If a judgment creditor is garnishing your wages, federal law provides that it can take no more than 25% of your disposable income, or the amount that your income exceeds 30 times the federal minimum wage, whichever is less. Click here for more on federal and state laws that limit this amount.
Q: What if I don’t truly own the debt?
A: If you think the legal notice has inaccurate information or you don’t truly own this debt, you can file a dispute.
Q: Are there rights that protect me from this?
A: Yes. Here are the Department of Labor laws that limit how much can be taken from your paycheck and clearly defines concepts for you to better understand the implications of having your wages garnished.
Q: Can LendingPoint help me prevent this?
A: Yes! At LendingPoint we’re passionate about helping you become financially stronger. A personal loan may allow you to payoff your debt before a wage garnishment situation occurs.
Q: How do I move forward?
A: Having your wages garnished is not the end of the world, but there are many steps you can take before even getting to this point. If you know you’re behind on debts, are struggling to get out of the paycheck to paycheck rut, or have special circumstances that prevent you from making your monthly payments, contact us and talk to a Loan Specialist who can help.
LendingPoint is a personal loan provider specializing in NearPrime consumers. Typically, NearPrime consumers are people with credit scores in the 600s. If this is you, we’d love to talk to you about how we might be able to help you meet your financial goals. We offer loans from $2,000 to $25,000, all with fixed payments and simple interest.