When you are living paycheck to paycheck, the idea of someone cutting into that paycheck is frightening. But there are ways to prevent wage garnishment. Some people who are on the brink of garnishment are able to negotiate a payment plan with creditors in order to avoid a garnishment. In these cases, creditors may ask that you make payments through automatic bank withdrawals so that they do not have to rely on your remembering to send a check.
Those who are facing wage garnishment for a large amount of for several creditors may choose to stop wage garnishment by filing for bankruptcy.
Protection through Bankruptcy
Filing either a Chapter 7 or a Chapter 13 bankruptcy is one way to stop the threat of wage garnishment. When a bankruptcy attorney sets the wheels in motion to file bankruptcy, it creates an automatic stay. This means that most creditors must stop their efforts to collect debts by whatever means they are using or are planning to use. This includes phone calls, letters, bank account levies, judgments, or wage garnishments.
In many cases, if your finances have reached the level of turmoil that would encourage a creditor to pursue wage garnishment, it is likely that bankruptcy may have crossed your mind anyway. Often those with lower to mid-range incomes will file a Chapter 7 bankruptcy because it will wipe out most debts and allow a fresh start in most cases. Many times wage garnishments that have already begun can be reversed, and sometimes people are even able to have the monies taken returned to them. To qualify for a Chapter 7 bankruptcy you must pass a means test and be willing to live with personal assets below designated levels. To most people who are considering a Chapter 7 bankruptcy fulfilling these requirements will not require any major lifestyle change.
Those who have a higher standard of living, and have too much income or too many assets to qualify for a Chapter 7 bankruptcy can look into filing a Chapter 13 bankruptcy. Chapter 13 works much like a combination of debt settlement and debt consolidation. The court makes a determination regarding how much of your debt you should be able to afford to pay, and payments are made to a bankruptcy trustee. After payments have been made for the agreed amount of time, the bankruptcy is then discharged. Your bankruptcy attorney can help you determine which option will work best for your situation.
Paying for a Bankruptcy
If you are in financial dire straights, it’s likely that you will notice that there are fees associated with filing bankruptcy. When every penny counts those fees can look like a problem, but when you are getting rid of many bills as well as a lot of hassles, the fees involved do not seem so high. Often a bankruptcy attorney will take payments instead of being paid in full so that they can move forward on getting you the protection you need.
Letting the Garnishment Happen
For one reason or another, some people may find that they either do not meet the eligibility requirements to file bankruptcy, or they decide that bankruptcy is not a road they want to take. If you have carefully considered your options and have decided against bankruptcy, and also have not been able to come to a workable agreement with creditors, you might decide to just let the garnishment happen. If you do decide this, it is important to know what you are up against, and how much of your income can be taken from your paycheck.
New York law has provisions in place to help prevent people from being forced into a hardship situation because of a wage garnishment. The amount taken will normally be either 1/10th of your gross income, or a quarter of your take-home pay, or your gross income minus any taxes taken out, including FICA and unemployment insurance.
If your income is low, there are limits to what can be garnished, those who take home just over $200 a week are safe, and garnishments for those who many just a little bit are also limited. These limits apply to private debt, such as credit cards, bank loans, and medical bills. Debts such as taxes, child support, and government student loans do not qualify.
If your household is like most, you probably make too much money to qualify for an exemption from garnishment, and you still probably need everything you earn to make ends meet. If wage garnishment is in the cards, chances are you are overextended financially. Filing for bankruptcy will not only stop garnishments and other harassment, but it will give you an opportunity to develop better financial skills in order to make better decisions in the future. Don’t let your family suffer because your income is being slashed. Consult with a bankruptcy attorney and make an informed decision on what to do about wage garnishments and any other consequences your debts may present.