If you are faced with a wage garnishment, bankruptcy is not your only option to stop it. There are a number of things you can do that might prevent a creditor from garnishing your wages. Read on to learn about them.
(To learn about using bankruptcy to quickly stop wage garnishment, see Using Chapter 7 Bankruptcy to Stop Wage Garnishment.)
Once a creditor has obtained a judgment against you, many states require that it send you one last warning letter before the garnishment begins. This is usually called a “demand letter.” If you get a demand letter from your creditor, don't ignore it. Many creditors prefer to get voluntary payments from debtors rather than deal with the cost and time-consuming paperwork involved with garnishments. Use this opportunity to negotiate a payment plan with the creditor before it begins the garnishment process.
Some states offer their own additional protections against garnishment. For instance, in Ohio, you can request that the court appoint a trustee. In a trusteeship, you make payments to the trustee, who will then distribute those payments to your other creditors. As long as you are in a trusteeship, a creditor cannot garnish your wages.
In California, you can make a claim of exemption. You can reduce or eliminate the garnishment if you can show economic hardship and that your income is needed to support your family.
You should contact the clerk of your municipal or county court, or consult with a local attorney, to see what options are available in your state.
A consumer credit counseling service (CCS) may be able to help you stop a garnishment. Not to be confused with debt repair companies, a CCS is a non-profit agency that can help you negotiate and reach an agreement with your creditors to pay them over time. If your creditors agree to participate in this group payment plan, then they cannot garnish you as long as you make your payments.
If you do nothing after receiving the demand letter, you will then likely receive from your employer copies of the garnishment order and notice of the garnishment.
You should file any objections you have to the garnishment, in writing, with the court and and request a hearing. The garnishment papers might contain forms that you can fill in and request a hearing. If not, you'll have to complete and file something separately.
Some of the more common objections you can make include:
Under federal law, your creditor can only garnish the lower of:
If you are being garnished for child support or alimony, then up to 50% or 60% of your disposable earnings are subject to garnishment. Garnishments for student loan debts and IRS taxes are also subject to a different computation. The laws of your state may set even tighter restrictions. (To learn more, see How Much of My Wages Can Be Garnished?)
If the amount of money proposed to be garnished from your wages exceed what federal and state law allow, you should object to the garnishment immediately.
If the creditor did not follow garnishment procedure, then the court may terminate the garnishment order. An example of improper garnishment would be for the creditor to fail to give you timely notice of the garnishment.
If you already paid the judgment, or if the creditor received full or partial payment toward the judgment through other means (bank attachments, prior post-judgment voluntary payments, etc.) then you obviously need to object so that the creditor doesn't receive more than what it is legally entitled.
Once you have filed your objection, then you need to attend the hearing. If you file an objection, but do not go to the hearing, then the court may overrule your objection and the garnishment will begin.
Even if you attend the hearing and the court denies your objection, you can still use this as an opportunity to meet with the creditor and negotiate a payment plan. It may not be too late to stop the garnishment if you can get the creditor to agree.
If you have a legal basis to dispute the judgment (for instance, you were never properly served with the complaint and subsequent legal papers), it may not be too late to stop the garnishment. You will not be able to dispute the judgment at the garnishment hearing, so raising any of your defenses or objections will fall on deaf ears. However, you may be able to vacate the judgment by filing a separate motion, posting a bond (usually) and attending a different hearing. This can be a very difficult process, so you should speak to a local attorney to discuss this further. You must also do quickly, as you may have only a limited period of time to pursue this remedy.
Even after a garnishment has started, you can still try and negotiate a resolution with the creditor, especially if your circumstances change. For example, if you have an income tax refund that could pay off some of the judgment, then you may be able to get the creditor to agree to cancel the garnishment in exchange for a lump sum payment to settle the rest of the judgment.
If none of the above options are sufficient, you may want to consider using bankruptcy.