One of the scariest episodes a person can endure is to wake up one morning to discover that their paycheck or bank account has been garnished. Imagine checking your bank balance and discovering a huge negative number in your account as a result of a legal order placed by someone you owe money to. Additionally, what if you looked at your paycheck and saw 25% less than you expected to be paid, only to learn that your employer was served with a wage order? These actions can devastate your finances, embarrass you in the workplace, and create untold amounts of stress in your life.
A garnishment is usually the result of a court order requested by, and issued to, someone to whom you owe money. Prior to obtaining the right to garnish you, and creditor must first sue you in court, obtain a judgment against you, and then get court permission to attach your assets. In other cases, creditors such as taxing authorities or child support administrators do not need a judgment, and sometimes don’t even need court permission. Once a garnishment has been placed against you assets, it can be very difficult to remove. The process starts, in most cases, with the issuance of a Writ of Garnishment.
If the Writ is issued for wages, after the Writ is served on the employer, the employer must withhold wages as directed by the Writ until the judgment is satisfied, or until the court orders the employer to stop withholding. If there is more than one garnishment, each must be paid in full in the order it was served on the employer.
When wages are garnished, the employer pays part of the judgment debtor’s wages directly to the creditor. Wages cannot be garnished if the judgment debtor’s disposable wages are less than 30 times the federal minimum hourly wage per week ($217.50 per week). In any event, no more than 25% of your disposable wages for a week can be garnished.
If the Writ of Garnishment is issued for a bank account, after the Writ is served on the bank, the bank “freezes” the judgment debtor’s bank account. This means the judgment debtor will be unable to access money in the account unless the amount in the account exceeds the amount of the garnishment. If additional money is deposited into the bank account (like a direct deposit from work), it is often frozen too. The bank often assesses fees and costs associated with the garnishment proceeding.
Some assets may be exempt from garnishment. Money in a bank account held jointly by husband and wife cannot be used to satisfy a judgment unless both are judgment debtors or, in some cases, if the account was established after the judgment was entered. This is the same for business partnerships.
Negotiation with the Judgment Creditor is usually not an option once a Writ of Garnishment is granted. The creditor has little incentive to stop garnishing your wages, or to release your bank account, until their debt is satisfied. Bankruptcy can be an effective tool to stop garnishments immediately. Under all chapters of the Bankruptcy Code, a creditor will be required to stop garnishing you or release your bank account immediately upon filing a bankruptcy case. If you are facing this crisis, you should consider consulting with an experienced bankruptcy lawyer like Adam M. Freiman and Freiman Law.