No one wants to be targeted with a wage garnishment. Especially in these uncertain times, everyone should know what wage garnishments are, how they work, how to challenge a debt collector garnish wages, and when to contact a Chicago debt collection defense attorney.
Wage garnishments are used routinely by creditors and debt collectors. In 2017, a study by the ADP Research Institute found that one in every 14 workers in the United States was having his or her wages garnished.
How Common Are Wage Garnishments in Illinois?
That’s about 7% of the U.S. workforce, but the number of workers having wages garnished in Illinois, according to the ADP Research Institute study, was 10.5%.
Some of the numbers are startling. The study found, for instance, that approximately $1 billion is garnished every year by the U.S. Department of Education for student loan debts. However, child support is the leading reason for wage garnishments.
Half of all employees in the United States who are having their wages garnished have a child support obligation. Most states, including Illinois, have strict child support laws, and wage garnishment is seen as a useful tool to ensure that parents meet their child support obligations.
How Do Wage Garnishments Work?
When you default on a debt, the person or company (the “creditor”) you owe can sue you for the debt. If the creditor wins the lawsuit, the creditor receives a “judgment” against you. If the creditor tries to collect by taking a portion of your wages, it is called a wage garnishment.
With a judgment against you, a debt collector can freeze your bank accounts, place a lien on your home, or garnish your wages.
And in Illinois, a debt collector can also charge 9% annual interest on a judgment – which means that you could be burdened with payments for up to twenty-seven years – and a $3,000 judgment could cost more than $10,000 over a period of fourteen years.
Before your wages can be garnished, a creditor must notify your employer, who will then deduct a portion of your paycheck and forward that portion of your wages to the creditor. If you’re sued for a debt or if your wages are garnished, you’ll need legal help from a good consumer attorney.
You cannot ignore a debt collection lawsuit. If you do nothing, the creditor or debt collector will probably obtain a “default” judgment against you. About 90% of the people who are sued for debts do nothing in response to the lawsuits, and they are hit with default judgments.
Can You Successfully Challenge a Wage Garnishment?
Do not be a part of that 90%. Consumers who challenge debt collection lawsuits with a good consumer attorney’s help can often have the lawsuit either settled for a lesser amount or entirely dismissed.
Wages can be garnished for debts that include child support and back taxes, student loans, fines, and other court-ordered obligations. Overtime wages and bonuses also may be garnished.
To garnish your wages, after a creditor has acquired a default judgment against you, the creditor must inform your employer about the wage garnishment. After receiving a formal notification, your employer is then required to start garnishing your wages.
If Your Wages Are Garnished, Can Your Employer Retaliate?
Wage garnishments are a compliance burden for employers, who may deduct a service fee from each paycheck subject to garnishment. However, you cannot be disciplined, fired, or subjected to retaliation because your wages are garnished – provided that only one creditor is involved.
This limited legal protection is provided by federal law under the Consumer Credit Protection Act, but if more than one creditor garnishes your wages simultaneously, federal law no longer protects you, and your employer may legally terminate you.
Who May Garnish Wages Without Obtaining a Judgment?
The U.S. Department of Education – or a debt collector hired by the Department – may impose “administrative” garnishments with no judgment to collect a student loan obligation. The Internal Revenue Service may garnish wages with no court judgment if you owe back income taxes.
Creditors and debt collectors must inform you about a debt collection lawsuit, obtain a judgment, and inform you about wage garnishment before your wages may be garnished. Skipping any part of this process gives the court an adequate reason to halt the wage garnishment.
Does Bankruptcy Stop a Wage Garnishment?
If you’re already in debt, a wage garnishment can make it even tougher to get from one payday to the next. If a creditor sues you and garnishes your wages, it’s probably time to consider bankruptcy or another practical debt relief strategy.
Bankruptcy can be an effective response to a wage garnishment. After you file for bankruptcy, an “automatic stay” goes into effect that stops most creditors from garnishing your wages or taking other legal action against you.
An added benefit of bankruptcy is that it takes your creditors away from your employer. However, you should understand that wage garnishments for alimony or child support are not affected by the automatic stay that is issued when you file for bankruptcy.
If your debts are discharged in the bankruptcy process, and if the obligation you owe to the party garnishing your wages is included in the discharge, that creditor or debt collector may no longer garnish your wages or even contact you about the debt.
Is Bankruptcy Your Only Option?
Bankruptcy, however, can have negative repercussions, so it is not always the best way to respond to a wage garnishment. But, there are ways to offset the harm and people can often be in a better financial, and credit scoring, position soon after their debt is discharged in a bankruptcy.
It depends on your personal financial circumstances. A good Chicago debt collection defense attorney can determine if filing for bankruptcy is right for you, and if not, what other options are available.
Sometimes, wages are garnished by mistake or even unlawfully. If a debt purchasing company garnishes your wages, for example, you may in fact owe that company nothing.
A debt buying operation may claim that it purchased and owns your debt, but the company may not be able to document that claim in court. A good wage garnishment attorney will know how to handle such a case effectively on your behalf.
Why is the Right Attorney’s Help So Important?
If you’ve already satisfied a debt, and if your wages are being garnished mistakenly, you will need to have your attorney request a hearing to prove that you’ve paid the debt and to have the wage garnishment halted.
If your wages are being garnished in the State of Illinois, you have rights and options, and you’ll need to exercise them. In almost every case. the right attorney will find a way to reduce a wage garnishment or will be able to take legal action to end it.