The slow economic recovery from the pandemic is just another factor putting many Californians in debt. Nor are debt collectors all that compassionate about a debtor's predicament. Their sole interest is recovering the money owed. In many cases, your wages could be garnished. When you are working hard to regain financial solvency, a large portion of your earnings being siphoned away only threatens to set you back further, leaving you wondering whether it's possible to limit or stop wage garnishment?
While the answer is often yes, every situation is unique. Halting or reducing the amount being drained from your paycheck depends on your particular circumstances. One thing holds true in every case, however. The responsibility to act lies with you, not the debt collector. You must know your rights and options, and take action in a timely fashion. Take a moment now to understand how different factors affect your case and what can be done to ease your burden.
When Can Creditors Garnish Your Wages?
In the majority of cases, creditors must first win a money judgment against you in a court of law. In other words, they must sue and prove their case to a judge's satisfaction. It's important to defend yourself vigorously when faced with such litigation. If you ignore a summons to appear in court to defend the suit, the judge will rule against you in absentia and you will be faced with garnished wages and a significant loss of income.
Cases in which creditors must take you to court typically involve consumer debts, such as medical bills, credit cards, and defaulted personal loans. However, other forms of debt exist for which creditors needn't resort to legal action. Those include child support, alimony, and unpaid taxes. If your wages are garnished automatically or you are unable to successfully challenge your debt in court, there are still options to prevent money from being deducted from your paycheck or to limit the amount.
Is There a Legal Limit to the Amount Creditors Can Deduct From Your Paycheck?
Yes, there are limits on garnishing wages. California law mandates that creditors may garnish no more than 25% of your disposable earnings when your hourly salary is less than 40 times greater than the state or local minimum wage, whichever is lower. If your salary exceeds that threshold, then up to 50% can be deducted. Disposable earnings are defined as wages received after the deductions required by law (federal, state, and/or local income tax, social security, unemployment insurance, etc).
For certain other debts, different limits apply. For example, federal law allows up to 50% of disposable earnings to be garnished to pay child support unless the parent can demonstrate they are supporting another child who is not subject to the support order. As well, the US Department of Education may collect up to 15% of disposable earnings to satisfy outstanding student loans. The amount garnished for federal tax liens fluctuates according to your standard deductions and the number of dependents.
Are There Further Exemptions?
Again, yes, certain types of income cannot be touched by creditors. Social Security and disability income, veterans and survivors benefits or annuities, railway retirement benefits, federal disaster relief, and income received for child support or alimony are all exempt from garnishment. The chances of being awarded full or partial relief from wages garnished are inversely proportional to your level of income. That is to say, lower earners are more likely to find relief from garnishment than debtors with higher incomes.
As well, California law provides relief for debtors whose disposable earnings contribute to more than half of the financial support for their families. Sometimes referred to as a 'head of household' exemption, the legislation states that the amount necessary to provide that support is fully exempt from garnishment. While this only staves off your debt, prolonging the length of time it affects your life, it's a useful tool to protect your ability to earn a living.
Can You Be Fired for Having Your Wages Garnished?
While it is both a hassle and expense for employers to divert a portion of your wages to a creditor and prove they are complying with the order, California gives citizens a one-time free pass from losing their job due to wage garnishment. If it occurs just once, your employer cannot let you go. However, all bets are off if your wages are garnished repeatedly.
How Can You Avoid Wage Garnishment in California or Limit the Amount Deducted?
As with most states, there are four basic options in California when facing a mandated loss in wages due to delinquent debt. You can choose one or more methods from the four, as best suits your circumstances.
1. Negotiate With Your Creditors
While creditors ultimately want to be paid, they aren't entirely heartless. Assuming your debt is legitimate and you wish to resolve it, most are willing to listen when you demonstrate a willingness to cooperate. They recognize that the easiest method of payment for you is also the most likely way for the debt to be satisfied. Debtors should realize that any resolution won't succeed without setting a strict budget and sticking to it. It's painful, but the sacrifice is worthwhile.
2. Seek to Vacate a Default Judgment
If you believe the debt is erroneous or causing undue harm, dispute it. Judges are often reluctant to garnish wages when the debtor can justify their failure to pay or show reasonable cause for being in arrears. Again, the responsibility to act lies with the debtor. Failure to respond to a summons always results in a default judgment. However, if you can show that you weren't served or given sufficient time to prepare your defense, that judgment could be vacated.
3. File for an Exemption
Filing a claim for exemption means acknowledging the debt in question while claiming the garnishment is too onerous. Your claim should include a financial statement demonstrating how the judgment prevents you from supporting yourself and your family, be filed with the clerk of the court where the judgment was made, and be served to your local county sheriff. If the creditor doesn't object, most judges tend to rule quickly. If the creditor does object, a hearing must be scheduled.
4. File for Bankruptcy
Bankruptcy is a course of action with long-lasting effects, but it also provides immediate relief. Debtors earn a stay, effective immediately, preventing creditors from taking further legal action or harassing them. Wage garnishment is also suspended until the bankruptcy is settled. Ultimately, the action absolves some, albeit not all debt, but the price is steep. Valuable possessions are sold off to pay creditors and the bankruptcy appears like a bright red stain on your credit for a decade.
Putting an end to wage garnishment is possible in many cases. When it's unavoidable, options exist to lower the amount being deducted from your disposable earnings. The important things to remember are to respond quickly when you're served with a lawsuit to recover a debt or when your wages are automatically garnished, know your rights and options, and avail yourself of competent legal assistance to protect your interests. Contact the Law Offices of Thomas Kerns McKnight for a free consultation.