Last Updated: April 2, 2024
Disclaimer: We are not qualified legal or tax professionals and are not giving advice. Always speak with a qualified professional before making any legal or financial decisions.
If you are taken to court for unpaid debt, you may end up with wage garnishments. This can also happen if a state or federal agency goes after you for unpaid taxes or child support.
Wage garnishment works a bit differently for people who are self-employed or are independent contractors. Because an employer does not technically pay a wage to the self-employed or contractor, your wages cannot be garnished. However, this does not mean you are exempt from garnishment proceedings.
There may be some ways around this. If you are self-employed or an independent contractor, you must understand how wage garnishment works in your situation. Keep reading to learn more.
If you would like to speak to a debt specialist, click here for a free consultation.
First, we need to discuss what wage garnishment proceedings entail. Basically, a creditor can sue you in court for outstanding debt. Federal and state agencies can also garnish your wages without the added step of suing you.
Once there is a wage garnishment order, your employer is contacted and a certain amount of your income will be withheld from your wages. Once the total has been repaid, the wage garnishment is lifted.
There are ways to protect yourself from wage garnishments besides paying your debt on time. We discuss those in this article: How to Stop Wage Garnishment
The following types of debt can be garnished:
There are some legal requirements and legal protections around wage garnishment. These are defined in the Consumer Credit Protection Act (CCPA). The federal laws overseen by the US Department of Labor include the following protections:
Disposable earnings are also defined as the amount of earnings left after legally required deductions are made. These deductions include:
Some deductions that are not required by federal law are included in disposable earnings and are not considered when determining disposable income. These include:
If you have certain bankruptcy court orders or debts due for Federal or state taxes, there are no restrictions on the amount of wages that can be garnished.
Voluntary garnishment is also not limited by federal or state law.
Each state has additional protections. If you are facing wage garnishment or are voluntarily asking for wage garnishment from your employer, speaking with a qualified attorney is very important to protect yourself and your money.
If you are self-employed, you are not covered under Title III of the CCPA. You technically are not receiving a wage from an employer. This includes independent contractors, many business owners, and gig workers. However, there are ways around this.
In non-earnings garnishment, there are several methods of garnishment. These include:
As you can see, wage garnishment is far more onerous for self-employed people. If you are self employed, you must protect your assets.
Read more: Frozen Bank Account Nightmare? Learn How to Unfreeze it!
Since potentially 100% of your income or bank account can be seized, it is very important to protect yourself. First, pay your bills on time. Second, set up your bank accounts as recommended above to protect those assets.
In order to determine if you are a self-employed individual, determine of you are legally considered to be one. Most states use the following criteria. In general, you:
If you are considered a "contractor" but your employer does not match the criteria, speak to a lawyer as you may be protected.
Because this is a fairly murky area, we strongly enough you to speak with a qualified attorney to protect yourself. However, if you are self-employed, do what you can to avoid non-earnings garnishment.
If you have been sued or are expecting to be sued, do what you can to negotiate with your creditor. It is expensive to go to court both on the front end - paying legal fees and attorneys, as well as on the back end - having up to 100% of your income taken.
Before your get the demand for payment letter, talk to the creditor and work out a plan. Remember to get everything in writing and fulfill the offer. It will look very bad for you in court if you offer to pay and then reneg on the payment arrangements.
If you are facing either wage garnishments or non-earnings garnishmentm we strongly urge you to protect yourself by hiring a lawyer who understands this type of law.
Yes, self-employed individuals can have wages garnished. The process is slightly different for self-employed individuals, but the end result is the same.
Find out how a good attorney can help with wage garnishment.
Most debt in default can result in wage garnishment. This includes debt such as credit card debt, medical debt, student loans, and unpaid taxes.
Wage garnishment for self-employed individuals involves the creditor obtaining a court order to seize a portion of the individual's earnings. Unlike traditional employees, self-employed individuals do not have a fixed income, so the court order will require regular payments to be paid to the creditor based on their estimated income.
First, understand your rights as a self-employed individual and seek legal advice from an attorney specializing in debt and wage garnishment. The legal process is complicated and you need up-to-date legal information. Try to negotiate a payment plan with the creditor to avoid legal action.
Find out how to stop wage garnishment.
It depends. If your business is a sole proprietorship, your business assets may be at risk if you're unable to repay your debts. However, if you have a corporation or LLC, your personal assets may be protected from seizure. Again, seek legal advice to fully understand your options and potential risks.
Wage garnishment is a court order to take money from your wages to repay a debt. Any creditor to can sue for wage garnishment. Some federal and state entities are not required to take you to court to garnish wages for back taxes or spousal support or child support.
If you are self-employed, you can still end up with garnishment, but in the form of non-earning garnishment. There are no legal protections on how much can be garnished in this instance.
It is very important to pay your debts on time. If you have debts that are approaching collections or legal action, try to negotiate with the creditor. You may be able to avoid garnishment of any type.
Speak to an attorney about your situation and take steps on protecting yourself. If would like to speak to a debt specialist, we offer a free consultation to go over your options.
Disclaimer: Pacific Debt Relief explicitly states that it is not a credit repair organization, and its program does not aim to improve individuals' credit scores. The information provided here is intended solely for educational purposes, aiding consumers in making informed decisions regarding credit and debt matters. The content herein does not constitute legal or financial advice. Pacific Debt Relief strongly advises individuals to seek the counsel of qualified professionals before undertaking any legal or financial actions.
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