If you fall behind on your payments to creditors and they are not confident you will make payments, they might pursue wage garnishment. They might also consider wage garnishment if the money recouped from repossessing your vehicle or foreclosing on your vehicle does not cover the total amount of debt you owe. This amount is called a deficiency balance.
To garnish your wages, your creditors need to sue you, in court and get a judgment. You will be notified of how much you owe your creditors. This can include your total amount of debt, plus interest and other fees. The notification will include notice that your wages will be garnished until the full amount owed is paid off. This amount can be as much as 25% of your after tax pay each pay period and can include a sweep of your bank accounts if you have accounts.
Before your wages are garnished, you can work with a bankruptcy attorney to review some potential options. These can include:
Negotiating With the Creditor
Your attorney can contact your creditors on your behalf and determine if there is a way to negotiate a more affordable monthly payment. Your lawyer can also try to negotiate a debt settlement, where you would pay a lump sum to the creditor – typically less than the total amount you owe. The company might agree to this if they feel they might not receive any payment at all. When settling with creditors, in many cases you’ll receive a 1099M tax form that treats the discounted amount as income which you must pay taxes on.
File a Claim of Exemption
You can try to avoid wage garnishment by proving your personal or financial situation is such that you cannot afford a wage garnishment. If you have dependents and you don’t have enough money to provide for them and endure a wage garnishment, the wage garnishment might be avoided. Your lawyer will need to work with the creditors to provide proof of your financial situation, as well as your household obligations. With the cost of rising prices and inflation, however, the amounts the legislature fixed for available to exempt a wage garnishment directly are almost comically low.
Fight the Garnishment
In some cases, you might find out your wages are being garnished to pay off a debt that isn’t yours. It’s essential to review all notifications and documentation sent to you from the courts, your creditors, or your employer, and ensure it’s your debt. If it’s not, then you can work with your bankruptcy attorney to stop the collection. If you filed for bankruptcy and the debt was discharged through the proceedings, your attorney can also inform the creditor and ensure your wages are not garnished.
Take Out a Loan
If you really want to avoid having your wages garnished, you can try to qualify for a personal loan to instead pay off your creditors in a lump sum and avoid the embarrassment of looping in your employer to your financial struggles. However, if you have outstanding debt, it can be difficult to qualify for a loan, and you may need a cosigner. You might not qualify at all, so it’s essential to be realistic about this option.
File for Bankruptcy
Another option to avoid wage garnishment is to file for bankruptcy. Before doing this, you should work with a bankruptcy attorney to ensure this is the right option for you. If it is, then filing for Chapter 7 or Chapter 13 will enact an automatic stay where creditors are not allowed to pursue collection of debts. Then, your debts may be discharged or repaid through a repayment plan during your bankruptcy proceedings.
Let Us Help You with Wage Garnishment
If you have been notified of a wage garnishment, don’t panic yet. Let our lawyers at The Law Offices of Alexzander C.J. Adams, P.C. review your options and help you decide if bankruptcy is the right solution for you. We work for you, the people, and not institutions. Contact us for a free case evaluation, or no-obligation consultation. We are dedicated to helping you overcome this small bump in the road and assisting you to get on with your life.
