If money is being taken out of your paycheck to pay for debts, you may want to know how to stop wage garnishment. Depending on what your garnished wages pay for, you may be able to end or reduce the garnishments and keep more of your pay.
Wage garnishments can cripple you financially. Indianapolis wage garnishment lawyer Jerry E. Smith and his legal team help people like you every day. Ignoring your financial problems won’t make them go away. Bankruptcy protection may make garnishments more manageable or bring them to an end.
A wage garnishment starts with an order from a court or a government agency which is enforced by your employer. It withholds a given amount of money and sends it to your creditor or government agency.
If you’re paying off a private debt and the creditor sued and then won the case, a judge can sign a garnishment order to collect on the debt. If another such order is pending, an attorney could challenge it and seek to stop the wage garnishment.
There are times when wage garnishment could happen without a court order. It depends on to whom or what you owe money. Garnishment that happens outside of court intervention is possible if you owe:
Creditors can take only so much of your pay in Indiana. Creditors can garnish the lesser of:
Disposable earnings are wages left after you pay deductions required by law. Under state law, if you show good cause, your payments could go down to ten percent of your disposable income. However, they can also go as high as 60 percent.
All child support and spousal support court orders include income withholding. If you are subject to a child or spousal support order, up to half of your disposable pay may be garnished. If you have no such support you must pay, up to 60% of your earnings may be garnished.
If you’re in default on a federal student loan, the U.S. Department of Education, or an entity collecting it for them, can garnish your wages without a court. This payment can be 15% of your disposable income but not more than 30 times the minimum wage. If you owe back taxes, the government can also garnish your wages without court involvement.
While you can’t stop all wage garnishment, depending on financial responsibilities you face, you do have some legal options. If you want to know how to stop wage garnishment related to some of your debts, talk to our team at Jerry E. Smith’s law office.
Filing for bankruptcy is how you can stop wage garnishment of debts outside of those we list above. It stops through an automatic stay on collections. Depending on why you’re paying, it may only be temporary. It won’t impact child support, alimony, tax, or student loan payments since these are non-dischargeable (can’t be cleared) priority debts under the bankruptcy code. There are limited exceptions if you can show payment is a hardship. To learn more about those exceptions and to find out if they apply to you, talk to our wage garnishment lawyer about your situation.
Filing for bankruptcy makes more or less sense depending on how much of your debt can’t be discharged:
You have three bankruptcy options to have your debts discharged and to make wage garnishments stop.
Chapter 7 bankruptcy involves selling assets (with some exceptions) to pay as much debt as you can. Individuals and married couples can file for this protection. There’s no minimum or maximum amount of debt to qualify. There are some requirements to file. You need credit counseling from an approved credit counseling agency 180 days before filing. You must also file a debt management plan with the bankruptcy court.
The point of bankruptcy is to clear as much debt as possible. It allows you a fresh financial start. When the process is over, you won’t owe money for discharged debts. Creditors aren’t allowed to try to collect money from you.
Chapter 7 law was amended in 2005 to include a “means test.” It’s meant to screen out people who may try to abuse the system. If your monthly income is more than Indiana’s median, you need to pass this test. A bankruptcy trustee will be named if your filing is accepted. He or she determines what assets and debts you have.
Part of a Chapter 7 proceeding will include the potential to stop any garnishment of your wages to pay down your debts, depending on to whom the funds are owed.
Chapter 11 is meant for businesses and people with significant debt. Chapter 11 includes a stay of debt collection or wage garnishment. Like Chapter 13, it involves creating an affordable payment plan. The plan could include payments stretched out over a longer time, a better interest rate, or less debt to pay.
This option is more complex and costly than other bankruptcy types. Chapter 11 filings are far fewer and most cases involve businesses. Chapter 11 may be a good option for you if you earn too much for a Chapter 7 discharge and you have too much debt for Chapter 13. When you file, you should review any wage garnishments you face so you can determine which ones can be stopped.
Chapter 13 bankruptcy is called the wage earner’s plan. You would create a plan to repay all or part of your debt. You would have three to five years to pay what you owe. During this period, your creditors can’t start or continue collection efforts (including garnishment).
Filing a petition under Chapter 13 stops most debt collection actions against you or your property. During this time, creditors can’t continue lawsuits or wage garnishments. The automatic stay also protects those who co-signed debts for your personal, family, or household reasons.
If you’re in foreclosure but before a foreclosure sale, a Chapter 13 filing stops the process. You would have time to make past-due mortgage payments current. You must keep up regular mortgage payments during the plan period or you could lose your home.
Three types of debt claims could be made against you:
For Chapter 13, your disposable income is your income (not including child support payments you get) less what’s reasonably necessary for yourself and your dependents. If you have a business, the disposable income doesn’t count your ordinary operating costs.
The process includes a meeting between you and your creditors and a later confirmation hearing. The bankruptcy judge would decide whether your plan is workable and follows bankruptcy law. Creditors could object to its being approved (or confirmed). Usual objections are that your payments would be less than a Chapter 7 payment and that you should use all of your disposable income to pay your debts.
If your plan gets the judge’s approval, it’s legally binding on you and your creditors. Payments must be made on time and creditors may get less than all the money they’re owed. You can’t have any new debts without consulting the trustee. You won’t be allowed to commit to paying new debt unless you can pay it in addition to the ones in your plan.
Just as with filing bankruptcy under Chapters 7 or 11, if you file under Chapter 13, you may have the opportunity to stop garnishment of your wages to cover certain types of debt.
Your bankruptcy filing can stop a wage garnishment immediately. It may be the right choice for you and your family. If you want to talk about how to stop wage garnishment in Indiana or have decided you need legal help with a bankruptcy matter, CPA and affordable bankruptcy lawyer Jerry E. Smith is the one for you. Call us at (317) 917-8680 for a free consultation (up to one hour) today.