What Is A Wage Garnishment?
When people hear the term garnishment, they might think of a garnish on a plate. Wage garnishment has nothing to do with fine dining. Wage garnishment is when a creditor deducts money from debtor’s paycheck. There are several kinds of wage garnishments. One type of wage garnishment is the deduction of funds from the debtor’s paycheck to pay a domestic support obligation such as child support or alimony.
Another kind of wage garnishment is a tax wage garnishment. If you owe money to the IRS, and haven’t been paying the debt, eventually the IRS will initiate a wage garnishment to pay that antecedent tax liability.
Perhaps the most common wage garnishment that I see is the result of a judgment. If a debtor owes a creditor money, and isn’t paying, eventually the creditor will either sue the debtor directly, or retain the services of a collection agency, or sell the debt to a collection agency, which will sue. At the end of the lawsuit, the California Superior Court will enter a judgment against the debtor. The creditor can then enlist the services of the sheriff to levy funds from the debtor’s bank accounts and garnish the debtor’s wages. The sheriff will send a garnishment order to the payroll department. The garnishment will start within a pay cycle or two. Then, money is taken out of each check to pay the debt.
What Is The Maximum Amount That Can Be Garnished From My Paycheck?
Generally, the maximum is 25% of the check. If there is a domestic support wage garnishment, that can be a little bit different because that may be tied to a specific dollar amount rather than a percentage of the check. A tax garnishment can be pretty much any size that the taxing authority wants. The taxing authorities, however, are fairly realistic and know that if they take everything, then the debtor will stop working. After all, what’s the point of working if every penny goes to the taxing authority?
When Would A Creditor Garnish A Debtor’s Wages?
A creditor will garnish a debtor’s wages after getting a judgment, not before. This is because we have a protection in the United States called due process. If somebody takes money from you without due process of law, the English word we use to describe it is theft.
Let’s say you owe creditor ABC $10,000. Initially, ABC will try to get you to pay by sending you letters and calling you on the phone. If that doesn’t do the trick, then typically they’ll either retain the services of a collection agency or, more likely, they’ll sell the debt to a collection agency. The term charge-off will then appear on your credit reports. People sometimes misinterpret that phrase to mean that the debt has ceased to exist, which is incorrect.
All that’s happened is the creditor has sold the debt, and you can be sure they sold it for a good deal less than the face value of the debt. Your creditor calls Dewey, Cheatum, & How down the street and says, “We’ve got this $10,000 debt. You want to buy it?” Dewey says, “Sure, we’ll pay $500 for it.” Only 500? This is a $10,000 debt, but creditor ABC hasn’t been able to collect anything on it. Now, they’ve had a loss of $9,500. They’d like to at least get a tax benefit by reporting the debt as a bad debt, to lower their gross taxable income and, as a result, lower their tax liability. In evidence of that, they will mark in your credit reports that the debt has been charged off.
Dewey has this debt now. Can they collect only $500? Oh, no. The face value of that debt is $10,000, so they will try to collect $10,000 from you. Usually, they’ll use a tactic where they contact you to say, “Well, you owe our client $10,000, but we’ve been authorized to settle for $7,500. This is a savings to you of $2,500. But we must receive payment in full within 30 days or we’ll have to take appropriate actions.” This message is usually vaguely worded. If that doesn’t do the trick, then the next communication is typically somewhat disappointed in tone. “You don’t understand. I offered you this really great deal to reduce your liability to my client by $2,500. Why didn’t you take me up on it? I have been authorized to extend this for 30 more days, but we must receive payment in full immediately. Otherwise, we’ll have to take legal action.” At the same time, you’ll be getting a succession of phone calls all day long. There are limits in the Fair Debt Collection Practices Act on the times of day that the creditor can call you, and if you have problems with your employer, they can’t call you at work; but they are really quite persistent.
If that doesn’t produce payment, then eventually, they will file a lawsuit against you. If you want to defend, you’ll have 30 days to file a written response. After the thirty days have passed, the creditor will file a second document called a request for default judgment. If you don’t take action on that, the clerk of the court will enter a default judgment. Default judgment in hand, the creditor can now enlist the services of the sheriff to contact your payroll department to initiate a wage garnishment.
The creditor can also record liens against assets you have, typically real estate such as your home, or they can enlist the services of the sheriff to levy funds out of your bank account, which is instantaneous. You’ll get no warning whatsoever; the vacuum cleaner hits the bank account, and it’s empty. At least with wage garnishment, you’ll typically get one or two pay cycles of warning before the wage garnishment starts. Your judgment garnishment will persist until you either file for a bankruptcy protection, which will stop the wage garnishment, or you pay the debt in full. As you can see, a creditor isn’t completely without recourse.
For more information on Wage Garnishments in California, a free 20 Minute Phone Strategy Session is your best next step. Get the information and legal answers you are seeking by calling (562) 777-9159 today.
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