How Bankruptcy Stops Wage Garnishment
While having a wage garnishment against you may be embarrassing, you must know that you aren’t alone. In a report by ADP Research Institute, it was found that of the 13 million employees who participated in the study, 7.2% had wages garnished.
In addition, the study revealed that of the wages garnished:
- 3.4% were for child support;
- 2.9% for other forms of garnishment such as student loan and court-ordered consumer debt garnishment;
- 1.5% for tax levies; and
- 0.4% were for bankruptcy.
While these figures are meant to provide comfort, the reality is you may still feel uneasy when facing wage garnishment. We know how difficult it is to navigate your rights during bankruptcy–But The Jones Law Firm can help.
Stop Wage Garnishment With Bankruptcy
During a bankruptcy filing, the court may order your employer to withhold portions of your pay to send it to the person or entity to which you owe money. This is known as wage garnishment. However, there are two forms of garnishment. They are:
- Wage garnishment and
- Nonwage garnishment or bank levy, where your creditors may tap into your bank account.
Typically, a notice of garnishment is sent to you and your bank or employer, depending on the form of garnishment. Then, the actual withholding will begin in five to 30 business days and last until the debts are repaired.
The only debts applicable to a wage garnishment include:
- Child support
- Student loans
- Any debts that have been the subject of a collections lawsuit
While you may wonder how long the garnishment will last, there are ways to stop it all together via a Chapter 7 bankruptcy filing. Under the automatic stay of bankruptcy code, once your petition is filed, the automatic stay will stop any garnishment that is not for domestic support.
Though the law states that garnishment must end with the bankruptcy filing, the courts have had to come up with a test to prove a willful violation of the automatic stay by creditors.
Willful Violation–Stop Wage Garnishment with Bankruptcy
In the case IN RE WOZNY-McCULLOUGH, a debtor was seeking damages from a former creditor who ignored the issuing of the automatic stay.
Because the creditor was aware of the automatic stay, the further collection of garnishment was considered a willful violation. In general, the court will use the following test to prove a willful violation of the automatic stay.
- 1. The creditor knew that the automatic stay was in effect; and
- 2. The creditor’s actions that violated the automatic stay were intentional.
In addition to collecting damages for willful violations, for those who had wages garnished within 90 days of their bankruptcy filing, you may receive such funds back if they were over $600 and you have enough exemptions to cover them. However, this process of recovering garnished wages can be difficult, so be sure to meet with an Ohio bankruptcy attorney who can guide you through the process.
How much of your wages can be garnished?
When we hear wage garnishment, many think that it means you’ll be left with nothing in your paycheck. However, that’s not actually the case at all.
Under federal and Ohio state law, there are limits on wage garnishment amounts. In Ohio, a creditor with a money judgment can take the following amount from your income earnings:
- 25% of disposable earnings
- Disposable earnings less 30 times the current federal minimum wage of $7.25 per hour or $217.50 per week
Disposable earnings are the remaining balance after taking out taxes, and other mandatory deductions. Deductions like health and life insurance don’t reduce disposable earnings.
Other wage garnishment limitations include:
- Child support: Under federal law, up to 50% of your disposable earnings can be garnished for child support if you’re currently supporting a spouse or a child who is not part of the bankruptcy order.
- Defaulted student loans: Up to 15% of your disposable income can be garnished for defaulted student loans.
- Unpaid taxes: Depending on the local and state tax law ramifications, this will determine the percentage of disposable earnings that can be deducted for back taxes. An Ohio bankruptcy attorney can guide you through that specific process.
Other Ways to Stop, Avoid Wage Garnishment
Bankruptcy is one way you can avoid a wage or nonwage garnishment. However, you may have other options. Other ways to stop or avoid wage garnishment include:
- Make a payment to avoid the garnishment with 15 days of the formal notice being given
- Appoint a trustee to manage your debts
- Begin credit counseling
However, if you cannot afford to make the payments, bankruptcy and the automatic stay may be your best option to stop or avoid wage garnishment.
Stop Wage Garnishment with The Jones Law Firm: Ohio Bankruptcy Attorney
Having a wage garnishment against you can make you feel uncomfortable in your workplace when you are already facing hardships. But The Jones Law Firm can help you navigate the bankruptcy code while preparing you for a second chance at a prosperous future.
If you are facing wage garnishments and are considering bankruptcy, the time to act is now. Contact the Ohio bankruptcy attorney, Michael Ryan Jones, today for a free consultation.