Wage garnishments can make it difficult for you to make ends meet. Your wages can be garnished when your employer is ordered by a court to withhold a percentage of your wages and send that amount directly to a creditor until you have repaid your debt. Garnishments may be ordered when you owe child support, taxes, student loans, spousal support, and consumer debts. If your wages are being garnished, talk to the attorneys at Swartz Swidler to learn about the legal rights that you have.
How wage garnishments happen
Wage garnishments are fairly common. According to the ADP Research Institute, 10.5% of the workers it reviewed between the ages of 35 to 44 and 7.2% overall had wage garnishments in 2013. The leading types of wage garnishments included child support, consumer debts, student loans, and tax garnishments.
There are two ways that creditors can reach your money. They can garnish your wages by getting a court order for your employer to withhold a portion of your earnings or levy your bank account to seize funds that are held in it.
Garnishments can occur when a creditor secures a judgment against you in court for not paying your debt. Some types of creditors can garnish your wages without having to sue you and to obtain a judgment, however. This can happen when you owe back taxes, child support, spousal support, or federal student loans.
When a court orders a garnishment, it sends a notice to your employer or bank and to you. The garnishment will start from five to 30 business days after the notice is sent. It will continue until your debt is paid. Garnishments differ in how much can be withheld from your checks.
Wage garnishments following judgments by creditors
If a creditor sues you in court for a debt, the court will enter a monetary judgment against you if you lose. The creditor that won the judgment against you can ask the court to garnish your wages. The court will then issue an order, and it will be sent to your employer. You must be notified about the garnishment by your employer, and your employer will be required to withhold a percentage of your wages and send it to your creditor. Your employer must also provide you with information about how to protest your garnishment.
Most types of creditors have to get a money judgment from the court and a garnishment order before they can garnish your wages or levy your bank account. However, certain types of creditors can garnish your wages without a judgment, including for back child support, spousal support, taxes, and defaulted student loans. Other creditors can’t simply start a garnishment without suing you and obtaining a judgment against you.
Under federal law, judgment creditors cannot take more than 25% of your disposable income or the amount that you earn each week above 30 times the minimum wage. If one of these amounts is higher than the other, the creditor can only take the lesser amount. Your disposable income is the net amount that you earn after mandatory deductions are taken out. Your mandatory deductions are for state and federal taxes and Social Security and Medicare. Your mandatory deductions do not include voluntary deductions that you choose to make for things like life insurance. New Jersey has a lower limit for some people. If you earn less than 250% of the federal poverty guidelines, judgment creditors will only be able to take 10% of your disposable income. If you make more than 250% of the federal poverty guidelines, your judgment creditors can take up to 25% of your wages. However, if you have two or more garnishments, the most that can be taken is 25%.
Your employer cannot fire you or retaliate against you because of a garnishment order. However, federal law does not protect you from termination if you have two or more garnishments. In New Jersey, employers are not allowed to fire workers because of wage garnishments.
You can object to wage garnishment. To do so, you must file paperwork with the court for a hearing. At your hearing, you can provide evidence to show the court that you need more money from your paycheck to cover your expenses or that you qualify for an exemption. The judge can either end the garnishment or allow it to continue.
Child support and spousal support wage garnishments
Under federal law, all child support orders issued since 1988 come with automatic withholding orders. After you have been ordered to pay child support, a copy of the order will be sent to your employer. Your employer will then be required to withhold the child support from your paycheck and send it to the state to be paid to the other parent. If you are also ordered to pay for your child’s health insurance, that amount will also be deducted from your checks.
Different limits apply to child support orders. Under the law, up to half of your disposable income can be garnished to pay child support if you are currently supporting a child or spouse if the child is not the child for the order. If you are not supporting anyone else, up to 60% of your income can be garnished. The state can take an additional 5% if you are more than 12 weeks behind on your child support payments.
Student loan wage garnishments
Different limits also apply for student loan wage garnishments. The U.S. Department of Education or collection agencies that are trying to collect defaulted student loans for the government can garnish 15% of your income. The government does not have to sue you and win a judgment to garnish your wages for defaulted student loans.
The Department of Education or its collection agency must notify you in writing at least 30 days before the garnishment starts the total amount that you owe, how you can obtain copies of your loan records, how you can start a voluntary repayment schedule, and how you can ask for a hearing on the garnishment.
Wage garnishments for tax debts
The IRS can take a large percentage of your income for back taxes without a court order. How much you will be allowed to keep will depend on your standard deduction and the number of dependents that you have. You will be paid a minimum amount each week by your employer, and the rest of your checks will be sent to the IRS. When the IRS intends to garnish your wages, it will send a notice to your employer. Your employer will then be required to provide you with a copy of the notice. In the notice, you will find an exemption claim form. You should complete this form and return it to the IRS.
Your rights when your wages are being garnished
You do have legal rights when your wages are garnished, but it’s up to you to exercise your rights. Under the law, you must be notified about the garnishment. If the notice contains incorrect information or you do not think that you owe the debt, you can file a dispute. Some types of income like Social Security and veterans benefits cannot be garnished. When they are deposited in your bank account, the banks are supposed to review whether these types of benefits have been deposited in the account during the last two months. Two months of federal benefits deposits are exempt from bank levies. However, other funds that are held in your account may be seized to pay a levy. If you think that the judgment was not made correctly, or if you are suffering undue harm because of the garnishment, it can be challenged.
What to do when you receive a garnishment notice
When you receive a garnishment notice, it is important for you to carefully review it to make certain that the information is correct. Check to see if it is for something that you have already paid and whether it is your debt. If the debt is yours, think about how much of your income will be taken and how it might impact you and your family.
You will then need to figure out what you want to do about the garnishment. It may be a good idea for you to talk to an attorney to determine your best strategies for dealing with the garnishment. Some of the options that you have include trying to work out a deal with your creditors. Contact the creditor and talk to them about the amount that you owe and how much you can afford to pay. Try to see if you can negotiate a payment plan that is more affordable than the garnishment.
You can also challenge the garnishment if you think that it was ordered in error or if it will cause you undue financial harm. You can also object to it if it is not being executed properly. However, you will need to act quickly. You must file your objection with the court after you receive a garnishment order within a few days. If you choose to object to the garnishment, it is a good idea to get the help of an experienced attorney at Swartz Swidler. A lawyer may understand the rules that apply to wage garnishments and help to present evidence that the garnishment is more than what is allowed or that it is unduly burdensome for your financial situation.
You can also simply decide to accept the garnishment and pay it off in the way that the judgment states. You can also use a loan or borrow money from your family members to pay the garnishment off in a lump sum for quicker relief from the garnishment. Finally, you can consider filing for bankruptcy protection. When a bankruptcy petition is filed, the garnishment will end while the bankruptcy case is proceeding. If it is for a judgment creditor, bankruptcy can discharge your responsibility for repaying the debt and end all further collection activities. However, bankruptcy will not absolve you of the responsibility to pay child support obligations, most tax debts, and most student loan debts.
A judgment of garnishment will remain on your credit record for as long as seven years and negatively impact your credit score. However, there are several things that you can do to build your credit during and after your wage garnishment.
Creating a budget and sticking to it can help you to avoid future garnishments. You can then use secured credit cards to help you to rebuild your credit.
What happens if your employer fires you for a wage garnishment?
Your employer cannot retaliate against you for wage garnishment in New Jersey. If your employer has terminated you because your wages were being garnished, you have legal rights. You can file a lawsuit against your employer for wrongful termination. The attorneys at Swartz Swidler may be able to recover damages or to obtain an order for you to be reinstated to your former position. Contact us today to schedule a consultation to learn about your rights when your wages are being garnished by filling out our online contact form.