How to Stop a Garnishment

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.



Facing wage garnishment can be a stressful and challenging situation, but it's important to know you have options to stop it in its tracks.

Whether through negotiating with creditors, challenging the garnishment, or exploring legal avenues like bankruptcy, taking quick and informed action can protect your finances and future.

In this guide, we'll walk you through straightforward and effective steps to halt garnishment and regain control of your financial well-being.

Don't want to read through? Speak to a debt specialist right now.

Wage Garnishment

Wage garnishment (wage attachment) is a legal means to withhold money from your pay check. The court orders that a third party can deduct payment directly from either the debt's wages or bank account. The most common causes of wage garnishment are child support or alimony, consumer debt, and federal student loans. Explore the nuances of how creditors garnish wages for self-employed individuals.

There are some entities like the federal or state government that do not need a court order to garnish your wages or bank accounts. The government can seize money for back taxes or child support. Federal law is fairly inflexible.

The best time to stop a wage garnishment or protect your money is to pay your bills on time. The second way is to be able to show that your income is in a protected class. If you receive a summons about a debt, do not ignore it. You may be able to prove that the debt is not yours or that you can not pay it. However, if you do not show up, you will lose by default judgment.

Filing for bankruptcy is often suggested as an easy out from debt. It is a very difficult process, so speak with a bankruptcy attorney before making any decisions.

For a thorough guide on implementing strategic solution services for garnishment and more information on fighting a court summons, read our article:  Difference Between a Summons and a Demand Letter

Some debts are not considered garnishable. These are secured loans like car loans, mortgages, and other loans that are backed by an asset. In those instances, the asset is seized and sold for your debt. However, if there is a discrepancy between the estimated value of the asset and what is owed, your wages may be garnished, depending on laws in your state.

For instance, you purchased a car and it was repossessed. You owe $15,000 but the car is sold for $10,000, you may still owe that $5,000. Since lenders look at garnishment as a last resort, you may be able to make a payment plan or lump sum payment to end the debt.

Types of Wage Garnishment

There are two types of wage garnishment. In wage garnishment, creditors can demand that employers deduct part of your earnings and send them to the creditor.

In non-wage garnishment or bank levy, creditors can access your bank account with some restrictions on how much.

For ease of discussion, we will refer to both as garnishment.

Means Test to Stop a Garnishment

If you can not afford a wage garnishment, you will fill out a means test. In a means test, you show your income and assets versus your expenses, especially related to the support of your dependents. A means test will identify your basic living expenses. If you do not have enough assets compared to expenses, the court will not allow your accounts to be garnished.

How Does a Garnishment Order Work?

If the court determines that you owe a creditor money, the court issue a wage garnishment order and notify your employer or bank that your wages or bank account are to be garnished. The process lasts until your debt possibly plus court fees and interest are paid. In some cases, you can make a lump payment plan. Generally, garnishment begins within five to ten days.

Most garnishments can be a lawyer issue so consider having a lawyer talk to your creditors.

How Much Can be Garnished?

The garnishment amount that can be garnished depends on several factors, including state law. The following information is offered "in general" and you must fill out a means test to indicate your garnishable amount.

Credit card, medical bills, personal loans, and most other consumer debt

The amount is based on the federal minimum wage of $7.25. The court can garnish either 25% of your weekly income that exceeds 30 times the federal minimum wage, whichever is less.

If you have a weekly disposable income (this is money not needed for living expenses and after mandatory deductions) of more than $290, the court order will be 25%. If your disposable income is between $217.51 and $289.99, the garnishment rate will be $217.51. If your income is less than $217.50, your disposable earnings can not be garnished.

Child support or alimony

If you are supporting another child or spouse, 50% of your wages can be garnished. If you are not, the rate is 60%.

If you are more than 12 weeks in arrears, the court can order an additional 5%.

Federal student loans

15% of your wages can be garnished.

How to stop it? Contact your loan servicer to see if they will cap your monthly payment or look into deferment or forbearance for the debt.

Taxes

The IRS can take up to 15% in taxes.

Prevent Wage Garnishment

The best way to avoid having your wages garnished is to prevent it from happening in the first place. 

Here are some tips:

• Stay current on all your bills and loans. Set up automatic payments or payment reminders if needed.
• If you fall behind, contact creditors immediately to work out alternate payment arrangements. Ignoring the debt will only make things worse.
• Prioritize paying secured debts like mortgages, auto loans, etc since defaulting can result in asset repossession.
• Maintain an emergency fund to cover essential expenses in case of job loss or other financial hardship.
• Review your budget regularly and cut discretionary spending if needed to free up more money for debt payments.
• Consult a nonprofit credit counseling agency for free debt and budget advice if you are struggling.
  

Stop Wage Garnishments

If you have received notification of a garnishment order, there are several actions you can take.

1. Call the creditor and see if they will work out voluntary payments
2. Challenge for errors or financial hardship
3. Make a lump payment or take out a personal loan
4. Look for debt relief options
5. File bankruptcy
   

You may want to contact a lawyer before you make any decisions. Actually, you may want to contact an attorney before you get a judgment! Many offer a free evaluation of your situation. Attorneys evaluate cases individually and if you enter into an attorney client relationship, you should receive good advice on your situation.

View attorney advertising with suspicion. They may promise the moon, but deliver just more debt. Shop for an attorney carefully because a good attorney client relationship can be a great blessing. Understand how a skilled attorney can provide assistance and potentially alleviate the stress of wage garnishment.

Let's discuss each of the options individually.

Call the creditor

A creditor suing is generally a last resort. It is expensive and time consuming. Try talking to the creditor before you end up in court. Most creditors will work with you and creditors prefer not going to court. Talk to them after you end up with a judgment. Offer them a lump sum payment if you can find a lower interest personal loan or set up a payment plan. Just get everything in writing and stick to the plan.

Challenge for errors or financial hardship

If you have found an error, the debt was the result of identity theft, or the garnishment is causing a bad financial situation, you may be able to get the garnishment order reversed. You may be able make a claim of exemption, show a reason when there is a wage exemption or prove a greater household exemption.

Make a lump payment or take out a personal loan

We addressed this above, but again, if you can stop garnishment before it happens or within a short time period, you may be able to get it removed from your credit report.

Look for debt relief options

Debt relief is the cancellation of part or all of your debt and slowing debt growth. Options include debt settlement, debt consolidation, credit counseling, a debt management plan, or bankruptcy. We'll discuss bankruptcy in more detail under the next heading.

Debt settlement is working with each creditor to decrease the amount owed while working with the debtor to build up enough savings to pay off the settled debt.

Debt consolidation involves paying off all or most debts with a personal loan.

Credit counseling includes learning to budget, understanding credit and other financial concepts.

A debt management plan can involve settlement, consolidation and counseling to create a plan to pay off debt.

Which you use depends on your situation and your total debt you have. Each comes with the possibility of a lowered credit rating and tax consequences. Always understand what you are agreeing to!

Challenge the Garnishment Order

If you receive a garnishment order, review it right away for any errors or improper service. You typically have a short window like 10-20 days to challenge the order. 

Some grounds for challenge include:

• You are already subject to another wage garnishment order
• The creditor does not have the legal right to garnish you
• The debt has already been paid off or discharged
• The garnishment amount exceeds legal limits
• Service of the order was improper

Consult a lawyer to understand your rights and timeline to act in your state. File the required exemption forms on time to suspend the garnishment until a hearing. Provide evidence like payment records, court documents, etc. to support your challenge.

Bankruptcy filing

Bankruptcy is a last resort. It is extremely expensive and time consuming to work through bankruptcy court and most people end up hiring a bankruptcy attorney. There are two common types, Chapter 7 and Chapter 11. Which you chose depends on your situation.

Basically, Chapter 7 involves liquidation of any assets and resulting pay off of debt. All debt over the income generated by liquidation is forgiven. Chapter 11 is a reorganization of debt with the debtor repaying all or most of the debt.

When you file bankruptcy, you are required to fill out many forms, provide proof of finances, and offer up sensitive or confidential information into public record, you will want a bankruptcy lawyer from a reputable law firm. In addition, there are long lasting credit report consequences and social stigma about personal bankruptcy.

Filing Chapter 7 or Chapter 13 bankruptcy stops garnishment collection actions through the automatic stay. Chapter 7 liquidates assets to pay off debt while Chapter 13 restructures debt through a 3-5 year repayment plan.

Consult a bankruptcy attorney to review your specific situation. Key factors like type/amount of debt, income, assets, and personal goals determine if bankruptcy is the right path forward. It negatively impacts your credit but can provide a fresh start if you are facing severe financial hardship.

Assets Exempt from the Garnishment Process

Some assets are exempt from garnishment as long as there are two months worth of deposits in the account. These include:

• Social Security Benefit
• Unemployment Benefit
• Retirement Account
• Child Support / Spousal Payment
• Veterans’ Benefit
• Life Insurance Benefit
• Disability Benefit
  

If you have any of these benefits, the best way to protect them is to keep them in a bank account with just those monies in it.

You do not want to move money out of an account in the face of a garnishment order. This is fraud. Before you take this action, speak to a local attorney. You do have a confidential relationship with your attorney, so you can speak with them without fearing leaking of sensitive information. If you are not facing a garnishment at this time, set up your bank accounts to protect your money.

Bank Accounts to Protect Your Money

There are several types of bank accounts that you can use to protect your money. Stop using any non-wage garnishment (also called levied or frozen) accounts!

Bank Account for Government Benefits

Set up a bank account just for your federal benefits and have the money direct deposited into the account. If you deposit a check into the acount, you will have to prove the money's origin.

Pay bills out of the account without transferring it to a second account. If you transfer money into a second account, they are no longer exempt and can be seized.

Bank Accounts in States with Garnishment and Levy Protection

Most states protect up to 75% of your income from wage garnishment. North Carolina, South Carolina, Florida, Texas, and Pennsylvania protect 100% of your paycheck.

Depending on which state you line in, your money is protected against non-wage garnishment. These states include New York, South Carolina, Maryland, North Dakota, and New Hampshire. Depending on the state, between $1,716 and $8,000 per account is considered exempt.

If you do not live in one of those states, you may be able to open an account in the state - it depends on state law.

LLC Accounts

Keep non-incorporated business money separate from personal expenses and income. Even better, turn your business into an LLC. If your business had garnishable debt, this protects your personal money and visa versa.

Foreign Bank Accounts

Foreign bank accounts are not generally subject to garnishment, but having one can be a red flag and changes your tax liability. While opening a foreign account is is fairly easy, speak with a qualified tax professional or have a lawyer talk before opening an off-shore account. 

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