If you receive a notice that your wages are going to be garnished, you need to act, and act fast! Here's some helpful tips you can use:
Here at Debt Relief NW, it seems like we get dozens of calls weekly from people who "just found out", that their pay check was going to garnished!
I've highlighted the phrase, "just found out" to make a point:
A WAGE GARNISHMENT DOESN'T JUST HAPPEN!
There is a legal process that must unfold before a creditor or debt collector can receive a writ of garnishment from he court to send to your employer.
I am going to outline, in a nutshell, so to speak, of the process and what you:
- COULD HAVE DONE TO PREVENT IT and,
- WHAT YOU CAN DO NOW TO STOP IT
For the purpose of this article, I'm only referring to UNSECURED DEBTS, such as:
- Credit or Store Cards
- Personal loans (NOT mortgage or auto loans)
- Deficiency judgment after a repossession
- Medical bills
- Private student loans
OK, let me lay out an example (based on over 15 years of helping people with their debt issues):
I'll call him Joe. Joe has a decent job and earns about $20/hour. At 40 hours a week and an average of 4.2 weeks/month, his GROSS (before taxes and deductions) is $3360/month.
Of course, after taxes and other deductions, his NET INCOME ("TAKE HOME") is only about $2352 (approximately 30% less than his Gross Income).
He is renting an apartment and has all of the usual bills.
His total budget or outgo is about $2100 a month, leaving him barely $250 for emergencies, etc.
Included in that budget is about $15,000 of credit card debt spread over 3 cards:
- Visa $8,000
- Master Card $6,000
- Home Depot $1,000
The total monthly MINIMUM PAYMENTS on all add up to $300/month.
Joe is having a very difficult time making the $300/month, minimum payments and then, he is working around the house and falls off a ladder and breaks his leg!
His insurance policy doesn't provide for any "disability income" for the accident, so not only is he going to be off work for about 3-4 months, he doesn't have any means of income.
Fortunately, he had a little savings account, but it wasn't enough to cover all of his monthly budget.
So, Joe does what thousands of people do every day, he pays all of the most important bills, like his rent, utilities, groceries, etc. and let's the credit card bills get behind.
After he misses a payment or two, he starts to get letters and calls, lots of calls!
At this point, Joe can't do anything about the annoying calls, because as long as his account is still with the original creditor, they have the right to call him about it.
But, once the account is charged off, sold, or transferred to a collection agency or other third party, then he can put a stop to the calls!. (I'll show you how in just a minute.)
Of course, Joe tries to explain to the caller what he is going through and they may or may not offer some kind of "HARDSHIP PROGRAM" to help him through this. But, it really doesn't matter as he just will not be able to make any payments until he is back to work and get some other bills caught up.
The original creditor(s) will most likely charge off, sell or transfer the account to a collector after about 120 days of so if nothing can be arranged.
So now, Joe starts getting letters and calls (LOTS OF CALLS) debt collectors!
He'd like to make some kind of arrangement with them, but they are demanding full payment on the balance or else!
At this point, he can put a stop to these calls. Here's how:
But, even though the calls are stopped and he is just "ignoring" the letters, the debt is not going to go away.
THE DEBT COLLECTOR DECIDES TO FILE A CLAIM
If the debt collector is unsuccessful in getting you to start making payments, then the debt collector may decide to start the legal process of obtaining a judgment.
An attorney for the collector will FILE A CLAIM at the courthouse of the county where you reside.
This CLAIM will generate a SUMMONS that will be delivered to you, usually in person, but sometimes by registered mail.
I'm not going to go into all of the details of what to do with the SUMMONS here, but you can check out a blog I've written that will be very helpful called:
WHAT TO DO IF YOU RECEIVE A SUMMONS.
But, please DO NOT IGNORE THE SUMMONS!
The fact that the collector decided to file a CLAIM proves that they are very serious about collecting on this debt.
If you ignore the summons, then a court date will be scheduled (you don't have to go), but a representative from the collector (now called the PLAINTIFF) will show up and the court will award them a DEFAULT JUDGMENT.
It's called a "default" judgment because no one contested it and they won by default.
NOW WHAT HAPPENS?
Now, the PLAINTIFF ( the collector) can apply for a WRIT OF GARNISHMENT.
The Writ of Garnishment is sent to your employer and they, by law, must obey the writ and withhold up to 25% of your net, after-tax, income.
Joe has just gone back to work and then he get's this notice from the payroll department that he is being garnished...and he starts to panic, which is understandable!
Remember when we did the math earlier about what his actual "take-home" or "after tax" income was?
That amount was $ 2,352.
Most states allow for up to 25% of the net, after-tax check to be deducted and sent to the creditor until the full balance (inflated now with interest and legal fees) is repaid!
WOW...WAIT A MINUTE...
$2,352 X 25% = $588 will be deducted from Joe's Net Check!
He could barely make it on the $2352, and now he has to somehow make it on $1764!
OK, so Joe's really in trouble, you get it...
How did this happen and what can he do about it now?
Joe could have stopped this "process" and ultimate JUDGMENT by trying to work out a SETTLEMENT PLAN with the debt collector.
Most debt collectors would much rather accept less than the full balance than go to all of the time and expense to seek a judgment:
When Joe received the summons, he could have contacted the attorney for the collector and most likely worked out some kind of repayment arrangement that may have included a reduced settlement!
Once the judgment was awarded and the plaintiff had spent more money in legal fees, they went after the garnishment.
But that doesn't mean that you still could not work out something to stop the garnishment!
You may be able to get them to stop the garnishment and take a more "reasonable" amount to repay the debt.
Depending on the circumstances, you may even be able to not only stop the garnishment, but also get a reduced settlement. Each case is a little different.
If this help, great.
If you find it a little "over-whelming", then maybe we can help: