Can You File A Hardship On A Garnishment?
If your employer is deducting money from your paycheck due to a wage garnishment (also called a wage attachment) and you can’t afford basic living expenses, you might be able to reduce the amount of the garnishment. Some of the ways to lower or even eliminate the amount of a wage garnishment include:
• filing a claim of exemption
• filing for bankruptcy, or
• vacating the underlying money judgment.
Most creditors can’t garnish your wages without first getting a money judgment against you. The creditor must sue you in court and then either win its case or else get a default judgment (which it gets if you don’t respond to the lawsuit). After the creditor obtains the money judgment, it must get a court order directing your employer to deduct a percentage of your wages. Not all creditors have to get a money judgment before garnishing your wages though. For instance, a streamlined process is available for creditors collecting tax, student loan, and child support debt. Federal wage garnishment law typically allows a creditor to deduct 25% of your after-tax income, depending on the type of debt. State law can limit the garnishment amount further. The creditor can garnish all of your wages above the protected amount.
Options to Reduce or Eliminate the Wage Garnishment
If you won’t be able to afford basic living expenses with the wage garnishment, here are some of your options:
File a Claim of Exemption
Your state laws allow you to keep a certain amount of property needed to work and live. In most cases, you’ll use the same laws when protecting property in bankruptcy with bankruptcy exemptions.
• The head of household exemption: Most states offer a head of household or family exemption. For instance, you might be able to claim this exemption if you provide more than 50% of the support for a child or other dependant. This exemption will protect more of your wages unless you agree to a wage garnishment in writing.
• Social Security and disability can’t be garnished: State and federal law prevent Social Security and disability benefits from being garnished (unless the underlying debt falls into a special category). The funds will retain their protected status in a bank account unless you comingle them with other funds. Once mixed with money from other sources, you’ll have a difficult if not impossible time proving that the funds in question are the protected funds.
• Complete the exemption form and file it with the court: You have a limited time to file an exemption. Check your paperwork for the deadline. After you file the form, the court will set a hearing. You should bring proof of your income and all expenses showing that you can’t afford the necessities of life.
File for Bankruptcy
Filing for bankruptcy not only stops most wage garnishments but in many cases, it will wipe out the collection debt along with other qualifying debt. When you file bankruptcy, an automatic stay stops most collection efforts. What will happen to your debt will depend on the bankruptcy chapter you file:
• Chapter 7 bankruptcy: In Chapter 7 bankruptcy, if the debt is one that qualifies to be wiped out, then the garnishment will be terminated forever.
• Chapter 13 bankruptcy: In Chapter 13 bankruptcy, you’ll make payments to your creditors through a monthly repayment plan. Keep in mind that some bankruptcy courts require your employer to withdraw your monthly Chapter 13 payment from your wages. Also, not all debts get erased in bankruptcy. In a Chapter 7 case, a creditor can continue to collect a non-dischargeable debt such as using a wage garnishment after the bankruptcy. In Chapter 13, you’ll pay all of your non-dischargeable debt in your repayment plan.
Vacate (Get Rid of) the Money Judgment
If you believe that the creditor obtained the judgment improperly, you can file a motion to vacate (get rid of) the judgment. In this request, you should list the reasons why you believe the judgment isn’t valid. Your situation will need to fall within the specific grounds allowed for vacating a judgment, and you should file the motion as soon as you find out about the judgment. If you win the motion and the judge vacates the judgment, the lawsuit won’t go away. But you’ll have the opportunity to file a response and challenge the lawsuit in court.
Talk to a Lawyer
Some of the procedures listed above are more difficult than others to do yourself. Many courts have self-help hours staffed by volunteers who can help you file an exemption. Filing a motion or a bankruptcy case will likely be more complicated.
How Wage Garnishment Affects You
Wage garnishment is more than an inconvenience, it may have significant consequences:
• It may lower your credit scores, thus affecting your ability to do things like get a car financed. Even if you can get a credit card or financing, you pay a higher interest rate
• Garnishment may lower your disposable income, which may affect your ability to pay your household bills.
• If you have more than one garnishment, your employer can terminate you.
There are several types of wage garnishments. The process varies depending on the garnishment source. You can face wage garnishment for some of the following reasons:
• You are behind on child support or alimony payments.
• You have debt from bankruptcy.
• You defaulted on your student loan payments.
• You owe credit card debt, medical bills, or any other consumer debt.
• You owe the government money.
While garnishment laws vary from state-to-state, it is legal across all states to garnish wages for unpaid taxes and child support. Some states do not allow wage garnishment beyond taxes and child support. Check with your state to see if garnishing your check is lawful.
• Most laws require your creditor to give you notice (with a few exceptions, i.e., owing back taxes).
• An employer cannot terminate you when they receive an order to garnish your wage. Unfortunately, you lose that protection if you have more than one garnishment. Your employer may consider you a risk and can terminate your employment.
• There is usually a maximum amount a creditor can request in a wage garnishment. They must leave enough for you to pay certain deductions, like your taxes and unemployment insurance; however, the law does not protect things like health insurance premiums from garnishment. It is better to negotiate with your creditor before wage garnishment. You can solicit a credit counseling agency to help you. Unfortunately, once you have a court order, you lose your leverage (even if you are working with a credit counseling agency) because the court sets the payment arrangement, and it may not work in your benefit.
The Wage Garnishment Process
Remember, wage garnishment is your creditor’s last resort to collect on your debt. It usually happens if you have ignored your creditor’s attempt to receive payment on an outstanding balance. The creditor seeks a court order, and, if approved, the creditor sends the order to your employer. The only times a court order is not necessary is if you owe child support, back taxes, or student loans.
Wage Garnishment: Child Support and Alimony
As of 1988, all new or adjusted child support orders come with a wage withholding order. Alimony only comes with an automatic wage withholding order if it is included with the child support as a family support payment. Otherwise, alimony does not qualify for automatic withholding. When the court grants a child support order, either the person seeking the support or the court provides a copy of the order to the employer. The employer then withholds the amount and takes note of the impacted payment. The wage garnishment can include deductions for medical insurance if the court mandates the parent to provide health insurance as part of child support. Usually, a creditor cannot garnish any more than 25% of your disposable income (or no more than 30 times the minimum wage whichever is the lower of the two). This does not hold true for child support.
• If you are married or have a child outside of the child support order, then only up to 50% of your disposable income is subjected to wage garnishment.
• If you do not have a spouse or a child outside of the child support order, you can lose up to 60% of your disposable income.
• Lastly, if you are over 12 weeks in arrears, an addition 5% can be taken out.
All-in-all, you can lose up to 65% of your disposable income; however, your employer cannot fire you or take disciplinary action because you owe back child support.
Wage Garnishment Process: Back Taxes
IRS garnishment can be more severe. The IRS has greater latitude when it comes to garnishing money from your paycheck, and it does not need a court order. The IRS does not have a maximum amount it can garnish. Instead, the wage garnish is based on the number of dependents you have and your standard deductions. The IRS notifies your employer, who, in turn, is mandated to give you a copy along with an exemption claim form to complete and return. While state and local tax agencies can garnish your wages, they do not have the same reach as the IRS. Since each state law varies, you must contact your state’s labor department to find out the wage garnishment laws.
Wage Garnishment Process: Consumer Debt
Consumer debt, such as credit cards, is also subject to wage garnishment. Consumer creditors, however, must get a court order to garnish your wages. When you first fall behind on your credit card payments, your creditor will attempt to collect. Once you default, the company determines whether they believe you will pay the debt. If they do not foresee you paying your debt, they may decide to sell your debt to a credit collection agency. The credit collection agency will attempt to collect payment. If they are unsuccessful, they may seek a judgment to garnish your wages. It is better to try to negotiate with your creditor before they file a lawsuit. There are some circumstances where you can stop child support payments. If your financial situation has changed or if you are having financial hardship, it’s best to seek legal advice. Child support issues are handled in a different court process. If your wage garnishment causes financial hardship, you have 30 days to object. During this time, you can:
• Request hardship assistance
• Ask the student loan agency to modify a payment plan
• Formally object in writing and request a hearing
The Timing of a Garnishment Order
The lender that issued your student loan has the right to ask the court to garnish your wages if you fail to pay or stop paying on your student loans. In most cases, a wage garnishment can be ordered if it has been at least 270 days since you last made a payment to the lender. If the garnishment request is granted by the court, you could be subject to having at least 15 to 25 percent of your paycheck seized until your student loan account is paid in full. In some instances, the garnishment can last for years depending on how much you borrowed from the lender. With this money taken out of your paycheck, the amount of money you take home to support you and your household with is significantly lowered. The garnishment could leave you struggling to pay basic expenses like rent or your mortgage. However, if a garnishment would create a financial hardship for you and your family, you have the right to request a hearing to present your evidence and explain your circumstances to the lender. You can ask that the garnishment be stopped until your finances improve or you can take other actions to pay off your account in full. Before the garnishment of your paycheck can be halted, you must prove that you are experiencing some type of financial hardship. The types of hardship cases that meet the criteria for stopping or delaying a student loan garnishment include:
• losing or being fired from your job
• having your hours at work reduced significantly
• taking a drastic cut in pay at work
• filing for Chapter 7 or 12 bankruptcy
• suffering a qualifying injury or illness
• failing to pay basic expenses like rent, groceries, and utilities
You cannot simply say that you are experiencing one of these circumstances and expect the lender to take you at your word. You must be ready to present evidence of any of these scenarios when you request a hearing with the loan servicer or a representative from the federal Department of Education. You have the right to request a prompt hearing at which to present the evidence of your financial hardship to your loan servicer or lender. To make this request, you need to write and submit a letter asking for the hearing and explaining what you can do to bring your account current at some point in the future. When writing the financial hardship letter, you should also include documentation proving your case. This documentation can include paycheck stubs showing a reduction in hours worked or income earned. You also can submit court documents like your bankruptcy filing, upcoming bankruptcy hearing date, disconnection letters from utility companies, and other paperwork showing that you cannot pay your bills. Along with this paperwork, you should also include details about how you will pay off your student loans in the near future whether it be through a payment arrangement with the lender or by applying for and taking a second job. Explanation of your good faith efforts to bring your account current could convince the lender to stop the garnishment of your paycheck and give you another chance to pay what you owe. A wage garnishment can take a significant portion of your paycheck that you cannot afford to lose. Even so, the company that issued your student loans can ask for the garnishment if you have failed to pay on your account. You can stop the garnishment order and utilize other means to handle your loans by providing evidence of your current financial hardship.
When you need legal help with a Garnishment in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506