Understanding The Background Of Wage Garnishments

Understanding the background of wage garnishments is essential in deciding how to respond to them. There are several ways to avoid being garnished; the best way to do this is by filing for bankruptcy. It would help if you also looked at how much money you have in your bank account and how much debt you owe. It would help if you also considered your child support and student loans, often garnished.

Child Support

Using wage garnishments to enforce child support is a tool states can use to collect payments. However, federal laws may have a different set of limits.

The federal Consumer Credit Protection Act (CCPA) limits child support wage garnishments. The maximum amount an employer can withhold is 60% of disposable income. However, states may have their maximum withholding limits.

The California State Disbursement Unit (SDU) disburses court-ordered child support payments. It records the child support payment amount, then forwards the cost to the other parent.

The order must be honored whether a child support order is a court or an administrative order from the child support agency. An employer who fails to comply with the order can be liable for penalties and damages.

In addition, state law may determine what is considered disposable income. This means the amount left after mandatory deductions such as federal, state, and local taxes, unemployment insurance, workers’ compensation, and health insurance premiums. In addition, the new spouse’s share of FICA/ Medicare and CASDI is not included in the calculations.

You can request a temporary stoppage of your wage assignment if you cannot pay child support. You must follow specific conditions to request this.

You can work out an alternative payment plan if the wage assignment is stopped. You may be liable for community service or jail time if you fall behind.

Consumer Debts

Understanding the background of wage garnishments and consumer debts can help you navigate these financial times. It can also help you determine whether you need help from a debt relief program or bankruptcy attorney.

Wage garnishments occur when your employer withholds a portion of your earnings to pay off debts. These can be federal student loans, credit card balances, back taxes, medical bills, etc. The amount withheld depends on your state of residence.

Wage garnishments can be stressful for both you and your employer. They can reduce your productivity and decrease motivation. They can also hurt your credit. You may be unable to open a bank account. You may also have your phone shut off if you don’t pay your bill.

The federal Consumer Credit Protection Act protects employees from overly burdensome garnishments. It also prevents employers from firing employees because of wage garnishments.

Wage garnishments are one of many ways that creditors can collect on the debt. Other methods include repossessing vehicles, eviction, and taking tenants to court to collect on rent.

The best way to avoid wage garnishments is to get help from a debt relief program or bankruptcy. Consider consulting a bankruptcy attorney before you file. This can also lead to a restructured payment plan.

Student Loans

Defaulted student loans are one of the most significant reasons for wage garnishments. In 2013, approximately 7.2% of employees had wages garnished.

This statistic is especially true in the blue-collar sector. The Manufacturing sector had the highest rate of garnishment.

The Department of Education has some unique rules for federal student loans. Generally, the holder of a defaulted federal student loan cannot garnish more than 25 percent of the borrower’s disposable income.

However, the Department of Education does offer a unique form of payment relief that borrowers can use. This option is referred to as a moratorium and will allow you to pay off your student loans at a slower rate.

To qualify for this loan relief, you must provide a detailed form to the lender. In addition, you will need to make several voluntary payments. These payments will gradually rebuild your credit.

When a borrower is in default on a student loan, the lender will send a notice to the borrower stating that the Department of Education will begin administrative wage garnishment. The notice serves as a warning, but it does not stop the garnishment from happening.

In some instances, you may also be eligible for a forbearance. This type of loan relief pauses repayment and allows you to find a job. Talking to your loan servicer about this option before proceeding is essential.

Also Read: What Are the Responsibilities of Tax Accountants?

Bankruptcy

Whether you have recently had a creditor garnish your wages or are just in the beginning stages of a creditor suing you, bankruptcy is the best way to prevent wage garnishment. In addition, bankruptcy will stop the garnishment of certain types of debts, such as credit cards. It will also erase court judgments and medical bills.

Wage garnishment can be very stressful. Typically, it starts after you have been served with a Writ of Garnishment or a court ruling has been issued. Therefore, it is essential to understand the garnishment process to prevent future garnishments.

When you file bankruptcy, the court will issue an automatic stay that will stop wage garnishment. This can last for up to 30 days. However, it may only last for a short time if you file again or your bankruptcy is dismissed.

You can also file a protest. Your creditor may agree to a reduced payment or even deferment. You can also reach out to nonprofit credit counseling organizations for help. If you have an emergency, using your home equity can help you settle.

You can eliminate the underlying debt if you file bankruptcy and receive a discharge. However, you will still have to pay wages until your bankruptcy ends. You can also use a chapter 13 repayment plan to make affordable payments to your creditors.