Are Your Wages Being Garnished by a Creditor? Here’s What to Do
If you’re struggling with debt, and you’ve begun hearing from your creditors or collections agencies, you’re likely aware that these companies can garnish your wages.
Wage garnishment refers to a court-ordered right to take money from your wages or your funds in the bank to pay a debt. Your creditor does this by suing you, obtaining against you, and then obtaining a Writ of Garnishment from the Court which is served on your employer or bank to ensure your debt is paid. Unless you claim the wages or funds exempt from garnishment, your employer or bank is then legally obligated to to turn some or all of your wages or funds in the bank to creditor.
If your creditor plans to sue you to garnish your wages, the experience can be extremely frustrating. You may even feel that the creditor has unfairly gone behind your back when you had every intention to pay when you could. While your creditor has to physically serve notice of the lawsuit to you, the creditor doesn’t have to give you a warning before this occurs. Typically, a creditor will not sue you until you are at least 6 to 12 months into default, but there is no legal requirement that it wait this long.
While pursuing garnishment is your creditor’s legal right, there are legal solutions to help you, including hiring a wage garnishment lawyer.
What You Can Do About Wage Garnishment After Hiring a Wage Garnishment Attorney
In Colorado, creditors can typically garnish 20% of your wages until you’ve completely paid off your debt. A tax levy from the IRS is much like wage garnishment, and it permits the IRS to take even more than private creditors through the use of their specific formula, typically anywhere from 30 to 70%. Student loan companies’ standard is 15% of your wages, and garnishment for unpaid child support can rise to 50% of your wages.
To avoid dealing with wage garnishment, you can work with a wage garnishment lawyer to find a better solution for debt relief.
Here’s what a strategic, expert lawyer will explain during a free consultation:
- If you are not paying a creditor, know that creditor will eventually sue: When you stop paying a creditor, the creditor’s rights and actions will often depend on whether it is a secured creditor (ex., car lender, mortgage lender, etc.) or unsecured lender (ex., credit card, medical bill, etc.). Secured creditors will typically start by repossessing or foreclosing on the collateral. They will then apply the proceeds from the repossessed asset to the balance due on the loan. If you still owe after that, the remaining ‘deficiency’ balance is unsecured. If you live in Colorado and are not paying an unsecured creditor like medical bills or credit card debt, know that a creditor’s best strategy to get you to repay is to threaten a lawsuit and, if that doesn’t work, eventually sue you to garnish your wages or take funds directly from your bank. In Colorado, judgment creditors can also put a lien on real estate you may own, like your home.
- Understanding when creditors sue: It’s important to understand the typical actions that a creditor might take. We’re all aware of the “30 days past due notice,” which eventually evolves into threats to sue. Six to 24 months tends to be the average amount of time creditors will take to sue. Keep in mind, however, that creditors have up to six years to pursue a lawsuit against debtors in Colorado. They may sell your debt to a collection agency during that time who can also sue you to collect on your debt.
- Find relief before creditors sue: If you can develop a debt settlement plan or file for bankruptcy before your creditor sues, this will save you a great deal of time and trouble. Getting in front of your unpaid debt will also likely save you money. If you are settling your debt, you can typically settle for less before you get sued.
- What happens when creditors sue: When a creditor has already sued, their approach is to get a court-ordered “writ of garnishment” to collect on their debt. They notify your employer or bank, which is required to notify you of the garnishment.
- Exemptions to wage garnishment: When you receive notice of the garnishment, you then have 10 days to claim funds exempt. In Colorado, the most common exemptions to garnishment are as follows:
- Wages are typically 80% exempt from garnishment. An additional wage exemption exists for workers who work 30 hours a week at minimum wage or whose pay is the equivalent of 30 hours times the minimum wage.
- You can protect up to $2,500 of funds in the bank. If the funds in the bank are directly traceable to social security or VA disability, they may be exempt up to any amount.
- If creditors put a lien on your property, you can protect your home’s value up to $250,000, or $350,000 for disabled homeowners or those over 60 (as well as those with elderly or disabled dependents in the home).
- You can also protect certain types of income, including social security.
Debt settlement attorneys find that debtors can often settle for approximately 50% of the balance due before getting sued, but typically are required to pay 60% to 80% of the balance due after being sued. And the balance due will increase to include the creditor’s costs, like attorney’s fees and court filing fees. If bankruptcy is your best debt relief option, it is better to file before you get sued because preparing for bankruptcy will typically require you to pay an attorney before filing and providing a bunch of paperwork including tax returns, bank statements and pay stubs. Also, sometimes bankruptcy requires some planning before you file (like waiting to receive a tax refund). Your ability to pay and plan for a bankruptcy is much greater before getting garnished.
Bankruptcy attorneys can often buy you some time to pay and plan for a bankruptcy if retained before you are being garnished. However, once you are being garnished, it is very difficult to stop it until you file bankruptcy, especially for wage garnishments.
If the creditor disputes the exemption, then you will have a court date to argue the validity of the exemption to the court. Once the creditor serves this writ of garnishment, you can still develop a legal strategy to protect your money and repay your debt in another way.
How bankruptcy and debt settlement can help: Even after a court-ordered writ of garnishment has been served, you can still file for Chapter 7 or Chapter 13 bankruptcy. At this point, wage garnishment will stop and your wage garnishment attorneys can help you get your debt completely discharged in Chapter 7 bankruptcy. You can also develop a three-to-five year payment plan in Chapter 13 bankruptcy. Although it is less likely that a creditor will accept a settlement after they’ve obtained a writ of garnishment, it may be possible to settle with the creditor even after a writ of garnishment has been served on your bank or employer. A superior wage garnishment attorney can potentially develop a strategy to negotiate with that creditor.
How to Find the Right Wage Garnishment Lawyer Near You
Once you have an understanding of the strategies available to you so that you can avoid wage garnishment, get debt relief, and start fresh, it’s important to know how to choose a wage garnishment lawyer to get started.
Look for these characteristics, as they indicate a thoughtful, understanding, highly experienced legal team:
- The team offers a free consultation to better understand your particular circumstances.
- The team provides a wide range of debt relief services, from Chapter 7 bankruptcy to small business bankruptcy.
- It’s clear the team is highly capable of handling cases like yours, based on testimonials and their years of experience.
- The wage garnishment attorneys you’ve chosen provide regular educational resources to the public to ensure that they remain knowledgeable about the options available to them for debt relief – no matter their circumstances.
Learn more about the best strategies for debt relief and to take charge of your financial future.