How Wage Garnishment Works and How to Avoid It?

Wage garnishment is one of the last resorts in debt collection when a debtor is unwilling or unable to pay back his creditors as per the terms and agreements previously agreed upon. This hurts the debtors as a part of the wage is deducted by the employers and paid directly to the creditors. It not only hurts the debtor financially but also creates a bad impression in the eyes of the employer who is bound to deduct a portion of the wage by a court order. With the law prevents the employer from firing the employee whose wages are being garnished second or third wage garnishment order depending on the state takes away such protection.

How Does It Work?

Once the debtor defaults on the repayment and the creditor has decided that it cannot collect the outstanding amount it would usually sell the debt to a debt collection agency. If the agency is unsuccessful in recovering the debt it usually takes the legal course in the interest of its client. A lawsuit is then filed against the debtor in an attempt to recover the outstanding dues. The court then passes an order directing the employer to garnish wages from the creditor.

Wage garnishment will take into account all the basic requirements and allow only a portion of the pay to be garnished. This amount to be garnished varies from state to state, for instance in California the law allows less than 25% of the wage to be garnished from the pay. It also protects the deductions that a person is legally required to pay such as federal, state and local taxes, unemployment insurance, state employee retirement system payments and Social Security payments.

How To Avoid Wage Garnishment

• The best way to avoid wage garnishment is to negotiate with the person or the organization to which you owe money. You can explain your financial constraints and work out a payment plan that suits your current financial situation without your wage having to be garnished. Although creditors aren't any legal obligation to accept your request in most cases they do so to avoid hassles associated with wage garnishment.
• If this doesn't work out with your creditor and you are facing financial constrains as a result of wage garnishment you can file for a "Claim of Exemption" in the court to stop wage garnishment. Here you will need to show the court that you are unable to meet your basic living costs due to wage garnishment and get a stay on this.
• Filing for a bankruptcy should be your last resort in avoiding wage garnishment. Here you will need to approach the court and the bankruptcy judge will issue a stay on almost all wage garnishments (child support is usually exempted from this). However filing for a bankruptcy has its demerits to and you should take those into consideration.

Ideally you should approach a wage garnishment attorney who will take your situation into consideration and help you choose a path keeping all your interest in mind.

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What is Wage Garnishment and What Are its Limitations?

Wage garnishment applies to some amount of the wages that an employer would need to withhold as repayment for debt of an employee. The same amount is handed over to the creditor. Wage is garnished when a person who owes debt is unable or unwilling to pay back the due amount as per the agreed upon payment terms. For many creditors this is one of the most potent ways of recovering their bad debts. Wage garnishment can also be one of the last resorts for the debtor to pay back the due amount.

IRS is one institution that regularly uses this to recover its dues. Apart from IRS wage garnishment can also be used by state governments, private creditors or even ex-spouse demanding alimony or child support. In addition to garnishing for taxes, federal and state governments can seek to attach wages if a person defaults on government-backed student or business loans.

However wage cannot be garnished without obtaining a court order. For this the lender will have to file a lawsuit and once the judgment in the lender's favor they can more to the employer and can have a certain portion of the wage garnished to cover their debt along with the interests. In case the employer fails to garnish the wages they are held accountable and have to pay the due amount. However some creditors can garnish wages without obtaining a court order and they include the IRS and the Department of Education. They can set notices to employers to start garnishing wages as soon as they take up any case.

Limitations of Wage Garnishment

Wage garnishment laws and their clauses can differ from state to state but they have the same clauses on most occasions. Let us take the wage garnishment laws in California and take a look at the limitations of that these laws have. In his regard the Federal law has strictly limited the amount of money that can be garnished from a paycheck. According to this law the state must provide as much protection to the debtor as the Federal law does. They can provide more protection to the debtors as per their discretion.

There have been recent amendments to the wage garnishment laws in California and effective July 1, 2013 law in California offers more protection to the debtor than the Federal law. If a debtor earns the minimum wage as specified by the law or close to the minimum wage there are strict limitations that the courts need to adhere to while deciding on a case of wage garnishment. The creditors are allowed to garnish less than 25% of the debtor’s disposable income for any workweek or the amount by which a debtor's weekly disposable earnings exceeds 40 times the state hourly minimum wage. The current minimum wage per hour is $8:00. Also disposable income is calculated after all the necessary deductions as mandated by the law.

If you are likely to face wage garnishment it would be advisable that you immediately get in touch with an attorney who would advise you with your case and how to avoid wage garnishment.

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How Bankruptcy is Helpful to Stop Wage Garnishment?

A debtor can fill bankruptcy to stop wage Garnishment. In some cases, filing bankruptcy can be used even to reclaim some garnished wages. However, there are some exceptions in such cases. When filled in an appropriate manner, bankruptcy has helped many debtors protect their wages.

The procedure for filing bankruptcy starts with a pre planning phase. This stage involves determining the type of filing that will be adopted such as an individual or a group filling. At this point, the debtor should take his time to learn all the bankruptcy filing procedures to eliminate possible sabotage cases. The next step will be gathering and filing documents. The debtor should know all the documents required where to look for them and other additional procedures required in filling the forms. The last part involves determining whether an attorney is needed. In case, the attorney is necessary, the debtor should contact the best team that could help his/her situation.

Filing bankruptcy brings into effect the automatic stay that stops collections by creditors. Wage Garnishment being a form of collection, as well, is stopped. Creditors can only continue with their collection by requesting banks to uplift the automatic stay. The court, on the other hand, will only uplift automatic stay, when beyond reasonable doubt, deems such request necessary. Automatic stay, however, never applies on domestic support obligations. It cannot be applied, for example, in alimony or child support. Such debt, according to a court ruling, is a priority debt that in no way can be affected. Domestic support Garnishment is immune to the automatic stay.

When a case is dismissed by the court, when the court orders a discharge or at the uplift of the automatic stay, an automatic stay stops functioning and collection starts. However, if the discharge is offered obligatorily such as in case of credit card debt the creditor is never allowed to assume collection even after the discharge. In case, the case is dismissed before discharge, the creditor is allowed to proceed with collection soon after the dismissal.

Wages gathered prior to filing bankruptcy can be recollected, however, only when some set conditions are met. There must be exception covering the wages. Additionally, bankruptcy must be filled within 90 days of collection. Finally, the aggregate value must exceed $600. If the conditions are met, a claim can be filed and through court order the collection will be returned. If the case is presided over by an attorney, the attorney's competency and the sum under question will determine court decisions.

Based on the debtor's state, a court may order an automatic stay immediately, or takes its time evaluating the matter. For a quick response, when filing bankruptcy, all the creditors must be listed, so that the bank notifies them immediately. Timing should be appropriate, that allows the court to make contact with all the creditors before they move into action. However, for immediate action, notification should be sent to the payroll department of the debtor company. On the other hand, the local police or levying authority, who collect garnished should be notified in advance.

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What Is The Main Factor That Defines Wage Garnishment In San Jose?

One of the common ways for creditors to get back their debts is by using wage garnishment. It is a legal order, given by the courts that allow the creditor to directly contact a debtor’s employer and get the accumulated amount deducted directly from the salary or wage. The creditors are however not allowed to intercept more than 25% of the wage in a month. Wage garnishment is usually one of the last steps creditors take to get back their money. The California Wage Garnishment Act compulsorily states that all employers (whether private or public) will have to obligate a wage garnishment direction and garnish a certain percentage of the employee’s wage for debt collection. Wage garnishment can be used to pay pending credit card bills, child support amount and back taxes.

Few Defining Factors of Wage Garnishment in San Jose

• Employee Termination After Wage Garnishment Direction - According to the state laws of California which are applicable to San Jose, an employer cannot terminate an employee because of a wage garnishment notification. This rule has been defined according to the Wage and Hour Division of the U.S. Department of Labor’s Employment Standards Administration. An employer has to honor two or more wage garnishment orders for any employee.
• Percentage That Can Be Deducted - According to the state laws, an employee or even a creditor cannot garnish an employee’s entire paycheck in one go. A certain percentage, in this case, 25 percent of the wage can only be deducted. However, this 25% should be deducted from an employee’s disposable income only. Disposable income means any income that goes to the employee after deducting the several kinds of federal, state and local taxes, medi-care, social security payments etc.
• On Matters Related to Alimony and Child Support – In San Jose there are certain restrictions imposed on alimony and child support too. If a debtor is supporting a child or a spouse that is not included in the order, the employer has the rights to garnish more than 50 per cent of the person’s wage. However, if it is found that the above condition does not hold truth the employer can deduct as much as 60% of the disposable income. The California state laws also have a provision where if the arrears exceed 12 weeks, an additional 5% can be deducted.
• Penalties Levied on the Employer - Wage garnishment can only be applied after a legal notice by the courts. Thus an employer is not allowed to garnish wages without getting a legal notification. If it is found that an employer is garnishing wage without a legal procedure, the state laws that govern San Jose, has a provision where the employer can be charged of non-compliance. Thus the employer has to pay back the garnished amount to the employee and restore all deducted amount. If the employer doesn’t follow the state directives, the Department of Labor can put a fine up to $1000 and imprisonment up to a year.

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6 Simple steps to stop a Wage Garnishment in San Jose

Wage garnishment is one of the most preferred ways for creditors in San Jose to recover their debts. For this they have to obtain a favorable judgment from the courts which allows them to recover debts such as pay day loan, credit card dues, medical loans and personal loans. Creditors usually contact your employer and can garnish up to 25% of your wages. If your wage has been garnished in San Jose, there are many things you can do to avoid this. Here we shall take a look at six steps which will help you stop a wage garnishment in San Jose.

1. Contact Creditors - The first step to stop wage garnishment is to try and get in touch with your creditors and work out an alternative payment plan rather than garnishing your wage. In most cases this might not work as the creditors would have lost faith in your will and means to repay. However some creditors are understanding and might give a patient hearing to you. It's always worth a try to negotiate a deal.
2. Pay in Lump Sum - If you have some savings somewhere or can garner some cash in hand, it would be wise to pay back some of your dues to the creditors in lump sum. This will prevent your regular income from being garnished.
3. File for Exemption - The next step to stop wage garnishment is to file for an exemption. If you can prove that your total income is needed to meet the basic necessities of your life you can seek an exemption from wage garnishment. Here you will need to fill your financial statement with a claim for exemption.
4. File Bankruptcy - If you are not eligible for an exemption you can file for a bankruptcy which will put an automatic stay on your wage garnishment. You can file for a Chapter 7 or Chapter 13 bankruptcy to stop wage garnishment. This will prevent the creditors from engaging in collection activities against you. However you need to keep in mind that the stay doesn’t apply to payments such as spousal support and child support which can be garnished from your wage.
5. Recover Garnished Wages - Yes you can also recover the garnished wages which have been garnished in the last 90 days prior to your filing for a bankruptcy. If more than $600 have been garnished in the last 90 days you can claim a refund. However if the amount is less than that your claims for recovery will not be entertained.
6. Contact Attorney - All these steps can help you avoid wage garnishment but it is very important that you get in touch with an experienced attorney in San Jose who will help you stop wage garnishment in a methodical manner. Your case would be unique and the attorney will guide you in stopping wage garnishment based on your circumstances.

Don't waste time or make unforced errors in managing your debt. Contact an experienced attorney and get respite from wage garnishment.

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