Wage Garnishment: What Is It?
If a creditor takes you to court over an unpaid debt, you could end up having funds removed directly from your paycheck.
Let’s talk about garnishes. Parsley, for instance, is a common garnish, but it’s not a particularly colorful or flavorful one. Still, depending on the general hue of the food you’re garnishing, parsley can be a simple and cheap option that gets the job done.
Citrus slices can provide zing, color, and a tasty little dessert all in one. While they may be most at home on the rim of a cocktail or on top of a slice of cake, it can work all the better as an accompaniment to savory fish or chicken.
And now we come to radishes, one of the most polarizing of the garnishes. The bright white and red of the radishes can be striking to the eye when it’s properly applied, but the taste, or lack thereof, seems to hit every tongue differently.
However, there’s one garnish that you can’t eat at all: wage garnishment. So what is it, and what can you do about it?
Wage garnishment: What it is and how it works.
If your wages are garnished, it means a portion of your paycheck will be going towards a debt or other financial obligation you’re required to pay.
“A garnishment of wages occurs only after a court has had an opportunity to review facts and decided that a ‘taking’ of wages is allowed,” explained Matthew Ryan, an attorney with the Flushing Law Group located in downtown Flushing, NY. “In essence, a court grants an order that allows garnishment of wages as a remedy for an aggrieved party.”
There are rules and regulations that establish how exactly wage garnishment can occur and how much can be garnished.
“Common reasons for wage garnishment include child support, student loans, or consumer debt,” recounted Jared Weitz (@jaredweitz), CEO and Founder of United Capital Source Inc. “There are, however, federal limits on how much a creditor can take based on your disposable income.
“Steps must be taken prior to a creditor implementing wage garnishment. A court hearing must occur based on the creditor suing you. The outcome of this court ruling can contain wage garnishment.”
The IRS can also garnish your wages.
You could also face wage garnishment if you owe more taxes than you’ve paid.
“When you have not paid your past due tax liability and have not made other arrangements with the IRS to pay off your tax debt, the IRS may take steps to garnish your wages,” warned Claudia Revermann, Attorney at Law, CPA, and co-founder of Lucent Tax Relief.
It’s a relatively easy step for the IRS to take. Often times, a garnishment simply has the effect of getting your attention. Calling the IRS and finding a different way to resolve your tax debt is likely to be in your better interests.”
Revermann also explained the process through which IRS garnishment happens:
“First, the IRS must give you proper notice, called a Notice of Intent to Levy. A levy is the same as ‘garnishment.’ Then, after 30 days, the IRS is able to contact your employer to request a wage garnishment. The IRS uses the information it gathers from your employer to determine how much it can take out of your pay.
“There are items that are allowed to come out from your pay first, such as current tax withholdings and child support payments. This is a continuous levy, which means that the IRS can leave this levy in place for as long as you are receiving a paycheck, or until you make alternate arrangements to pay your overdue taxes.”
What are your options?
Even if a court decides you’ll be facing garnishment, you may still have a chance to challenge the ruling.
“Once you have received formal notice of this wage removal you have a short window to challenge the decision through a written statement outlining your reasons for objecting and be willing to appear in court again to defend your cause,” suggested Weitz.
“Some instances do not require a hearing, such as with the IRS or student loan lenders. In these instances, you will still need to submit a written objection, and with regard to student loans, can request financial hardship to set up a payment plan outside of wage garnishment.”
IRS levies may also have additional options for you to pursue.
“You can challenge an IRS wage garnishment in a few ways,” offered Revermann. “First, you are able to request a Collection Due Process Hearing, which is an appeal of the collection process.
“Second, if your income is not sufficient to meet your monthly living needs and the payment of old tax debt would result in financial hardship, you can have the garnishment removed in whole or in part to allow you to meet your expenses.
“Lastly, you find another way to pay off your taxes, whether in full or reaching a separate installment agreement with the IRS, or you could file for bankruptcy protection.”
Businesses must comply with garnishments.
We’ve been talking about how to handle a personal garnishment you’re facing, but you should know that if you’re an employer, you may have to comply with a garnishment from the other side.
Cynthia Flynn, Esq., founder and managing partner of Hackler Flynn & Associates, directed us to a post she wrote about California employers’ obligations when it comes to wage garnishment. Most of it will also apply to employers in other states as well:
As a California employer, you have a number of obligations with regard to paying your employees, including minimum wage and overtime requirements, wage statements, and payroll taxes. One additional obligation that you may encounter is a wage garnishment order, or wage assignment order. A wage garnishment order is an order which requires you to withhold a portion of an employee’s wages and send it directly to the person named in the order. There are many different reasons your employee’s wages may be garnished. An employee’s wages may be garnished if a creditor has successfully obtained a judgment against the employee in court, and has gotten a court order to garnish the employee’s wages. For other types of debts, including back taxes, defaulted student loans, and back child support, a wage garnishment order may issue without a court proceeding.
A wage garnishment order or wage assignment order is a legal document with which you are obligated to comply as an employer. Failure to comply may result in civil penalties or even criminal charges. You may also face civil penalties or civil or criminal charges if you engage in the following conduct: Terminating or disciplining an employee as a result of receiving withholding orders for the payment of a single judgment, and postponing or advancing payment or earnings, or otherwise taking measures to avoid complying with a wage garnishment order.
Accordingly, it is important that you take wage garnishment orders seriously, and that you understand your obligations under such orders.
Complying with wage garnishment isn’t particularly fun. But not doing so would be even more of a pain.
Take care of your money.
Avoiding a wage garnishment is fairly simple: Make sure that you pay your bills and avoid taking on excess debt with personal loans and credit cards. But that doesn’t mean that it’s easy. For many people, it’s difficult to save money, which means that they have limited options when life throws a financial curveball their way.
In these situations, people with bad credit and little-to-no savings often end up relying on short-term bad credit loans and no credit check loans—like payday loans, cash advances, and title loans—to make ends meet. Even their better borrowing options, like installment loans, pale in comparison to a well-stocked emergency fund.
If payday lenders or online loan companies take you to court, the odds of avoiding a wage garnishment are not in your favor. If you’re being contacted by a business or a debt collector over an unpaid bill, don’t dodge the call. Instead, talk to them about what you can do to settle the debt.
If you want to keep the possibility of garnished wages at bay, you’ll need to become more financially literate and build better habits with your money. To learn more about managing your finances, check out these other posts and articles from OppLoans:
- 8 Good Habits to Get Your Finances—and Your Life—on Track
- Building Your Financial Life: Budgeting for Beginners
- Save More Money with These 40 Expert Tips
- Your Guide to Escaping a Debt Trap
|Cynthia Flynn is the founder and managing partner of Hackler Flynn & Associates, a boutique law firm with offices in Los Angeles and Orange County that focus on employment defense. Since starting her practice, she has grown the firm to seven associates. The firm’s focus is employment law where their mission is to protect and defend business owners.|
|Claudia Revermann has been practicing law for 16 years. She also has 20 years of tax practice experience, holding a Certified Public Accountant license and having previously worked as a tax accountant in a large regional accounting firm. She opened her own law firm in June 2015 and recently co-founded Lucent Tax Relief a Minnesota based tax relief agency who helps good people put their tax problems to rest.|
|Matthew Ryan is an attorney with the Flushing Law Group located in downtown Flushing, NY. Matthew has been a practicing attorney for nine years with expertise in civil litigation. His areas of expertise are in servicing clients in the areas of divorce & matrimonial litigation, estate planning, and UDRP disputes.|
|Jared Weitz (@jaredweitz) has been in the financial services industry for over 10 years. Due to his extensive work experience and deep network of close financial relationships, he handles a multitude of different finance options for his clients and contacts. Over the years, he has held positions in some of the largest business financing companies in the U.S. Some of his roles have been: Underwriter, Director of Business Development, Managing Partner and currently, CEO of United Capital Source, LLC.|