Everything to Know About Wage Garnishment

In 2017, one in fourteen American employees had their wages withheld, according to ADP, a payroll services firm. Gen Xers have the greatest rate of pay garnishment, with 10% of your demographic having their wages taken, sometimes from numerous creditors. Who could know? Certainly, Wage Garnishment is a public concern.

Garnishment Records Last for Years

Wage garnishments comprise the public record and can last up to seven years. Because garnishing your earnings requires a federal court order, anyone with authority over your records may see it.

However, in 2017, Experian, Equifax, and Transunion, the three largest credit agencies, agreed to remove civil judgments and tax liens from the public records area of their credit reports. They can’t, however, delete it from the official record. If your credit record is pulled, the wage garnishment will not appear.

But, if you seek a house loan, the mortgage company will find out since lenders examine your current earnings, tax returns from the previous three years, and work history.

Furthermore, any missing payments that may have led to the garnishment during the first place remain on your record. For instance, those late payments don’t disappear from your record but you can see them till seven years since the first missed payment.

As a result, even if the decision does not appear on the credit report, it might be found on a public record.

Wage Garnishment: What Is It and How Does It Affect You?

Wage garnishment is a type of debt collection that the government enforces. The outcomes of a judgment against you are forwarded to your employer. They then are required to set away a portion of your salary. Your employer then sends it to your creditor to help you pay off your debt. The garnishment will continue until the debt is paid in full.

Personal earnings, such as income from retirement accounts and pensions, commissions, incentives, wages, and salaries are subject to wage garnishment. On the other hand, you cannot consider “Tips” as personal earnings and therefore does not count under garnishment.

Non-wage garnishment exists, although you know it as a bank levy.

Wage garnishment can have an indirect influence on your credit score since the events that led up to the garnishment, such as late payments, damage your credit score as well.

Wage garnishment can also have an impact on:

• Child support and alimony
• Taxes
• Loans for students
• Consumer debt, such as loan applications or rent payments
• Employers

That’s correct; wage garnishment affects your employer as well, requiring more effort.

The Wage Garnishment Process

Some of the popular reasons for Wage Garnishment include:

• Businesses suing consumers for not paying their debts.
• Foreclosure lawsuits filed by banks
• Suing for non-payment of medical bills by insurance or medical providers

Several creditors, though not all, need to go through the courts to get a wage garnishment order. Without a court order, you may experience the wage garnishment situation to pay unpaid federal or state income taxes, child support, and alimony, and defaulted student debt.

The IRS has a cap on how much money it will take from you if you don’t pay your taxes. Even though the agency has a reputation for being ruthless, it does consider your children or spouse. At the state level, these considerations are also taken into account.

The IRS requires you to provide adequate written notice before garnishing your wages – you will receive a first, second, and final notification. Before garnishing your earnings, you have 30 days after receiving the last notification to correct the situation. The letters inform you of your legal rights, including the ability to appeal the court’s decision.

If you raise an extra kid or spouse, you may have nearly half of your disposable income garnished for child support and alimony.

If you don’t support another kid or spouse, the court can take up to 60% of your earnings. Furthermore, if you are more than 12 weeks behind on your support payments, an extra 5% might be deducted. 

To settle for student debts, the US Department of Education can take up to 15% of your disposable income. Before the garnishment commences, you will get a 30-day notice. You’ll also get a full breakdown of how much you are owing and how to request a court date.

If you owe money to anyone except the IRS, state tax authorities, an ex-spouse or child, or the Department of Education, the garnishment must be authorized by judicial order.

A creditor can sue a customer for failure to pay a debt. If the consumer fails to reply to the action, the court enters a default judgment, allowing wage garnishment to begin immediately.

The excellent news is that your employer cannot terminate you if your earnings are garnished. Unfortunately, only one garnishment can protect you. If you have many pay garnishments against you, you won’t be able to keep your employment.

Is it Possible to Stop Wage Garnishment?

It is possible to stop wage garnishment. 

You can go to court to fight it. Just keep in mind that if you lose, there can be a judgment against you.

You may talk to your creditors and develop a payment plan that works for both of you. Calculate how much you can afford to pay depending on your debt and use it as strength to arrange a monthly payment.

If you have any spare cash, throw it in as a lump sum payment to make the deal. The creditor may accept to avoid paying legal expenses and court costs.

You can prevent wage garnishment after entering into an installment arrangement with the IRS, as well as paying your whole tax amount in one go. If you just cannot handle it, you may be eligible for an Offer in Compromise and a lower tax payment.

You might also apply for a financial hardship exemption and find yourself on the Currently Not Collectible list. However, it isn’t permanent. It only serves to postpone the inevitable.

You have the option of declaring bankruptcy. Most debts, including garnishment, stop when you file for bankruptcy. However, you should only use it as a last option. Not all bankruptcies prevent wage garnishment, and not all include dismissal of tax debts.

The worst thing you can do, which is not advisable, is leave your job and switch employers. That halts the wage garnishment temporarily. The IRS has a unique set of abilities, and it will track you down. Then, you go back to square one after reissuing the garnishment order.

Takeaway

The best way to get rid of wage garnishment is to pay off your debt in some way, such as through an installment plan or other ways. Contact Platinum Tax Defenders if you need assistance with any aspect of the garnishment process.