A wage garnishment allows your employer to automatically withhold a portion of your wages and send the payment directly to your creditors. Recently on our legal forum a user asked, “If I cannot pay my medical bills will the creditors have a right to have my wages garnished?”
State laws for wage garnishment vary
In most states most creditors do have the right to garnish your wages. The good news, however, is that most creditors will have to take you to court and obtain a judgment and court order before they can take action (exceptions exist for certain debts such as child support, federal student loan debt, alimony, and tax debts). Also, the amount of wages which can be garnished will also be limited by federal and state laws.
For medical debts the creditor will have to sue you and obtain a judgment and court order. They also will also have to follow federal law which limits the amount that can be garnished to 25% of your disposable earnings or the amount by which your weekly disposable income exceeds 30 times the federal minimum wage. At the federal minimum wage of $7.25 this means $217.50 per week is off limits to creditors ($7.25 X 30).
For example, if you earn $900 each week and your take home pay is $700 after deductions for taxes, mandatory deductions for state disability or unemployment insurance, and mandatory retirement contributions under federal law your wages could be garnished by $175 (25% of $700) or $482.50 ($700 minus $217.50). Since the law dictates that the lesser amount be taken, the maximum garnishment would be $175.
Some states will have even more strict garnishment requirements. For instance, a few states including North Carolina, Pennsylvania, and South Carolina do not allow garnishment for commercial debt, such as credit card balances. Texas does not allow garnishment of wages except for unpaid income taxes, court ordered alimony and child support, and defaulted student loans. For more information you will need to review your state’s laws.
Avoiding wage garnishment for medical bills
The good news is suing someone and trying to obtain a wage garnishment is generally the creditor’s last resort. If the debts are high enough, however, do not expect them to just write them off. The best way to avoid a wage garnishment is to contact the doctor or hospital and find out if they are willing to work with you to create a reasonable repayment plan. Be sure to follow through with your plan. Do not ignore the creditor and just hope they will go away- they won’t. Also, do not agree to a plan if you cannot or will not make the payments.
Other ways to avoid a wage garnishment include paying off your debts completely, quitting your job, or filing bankruptcy. Consider, however, some wage garnishments will not stop by filing bankruptcy. For instance, debts such as child support, certain taxes, spousal support and federal student loans (with exceptions) cannot be discharged through bankruptcy.
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