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How to Stop Wage Garnishment for Credit Card and Other Unsecured Debt



How to Stop Wage Garnishment for Credit Card and Other Unsecured Debt

Getting your wages garnished can be a scary and stressful situation. One day you go to work expecting your normal paycheck, and the next you find out a chunk of it is being taken to pay back debt owed to creditors or debt collectors. It may feel hopeless, like there’s no way out, but there are options to stop wage garnishment and take back control of your finances. This article will walk you through some of the most common ways people are able to halt garnishment of their paychecks and get out from under the burden of debt.

First Steps When Facing Wage Garnishment

If you’ve just found out you’re facing wage garnishment, don’t panic. The first thing you’ll want to do is get organized. Make a list of all your debts, who they’re owed to, interest rates, minimum payments, etc. Also make a budget – tally up your income and necessary expenses like rent, utilities, food, transportation, childcare if needed, and so on. This will give you a clear picture of how much you can afford to put towards debt payments each month.

Next, contact your creditors, explain the situation, and see if they’re willing to work with you. Often they will agree to lower or paused payments if it means continuing to receive some money from you rather than none at all. Be prepared to provide documentation of your income and expenses.

If your creditors won’t budge, don’t lose hope. You still have options. Here are some of the most common ways people stop wage garnishments:

Negotiate With Your Creditors

Even after a judgement has been issued, it’s still possible in many cases to negotiate with creditors and collection agencies. Let them know you want to pay back what you owe, but the garnishment is causing significant financial hardship. Ask if they would be willing to stop the garnishment in exchange for regular, affordable payments from you. This could be through a debt repayment plan, reduced monthly payments, or debt settlement where you pay a lump sum that’s less than the full amount owed.

Come to the negotiation with a specific proposal based on what you can realistically afford. Don’t overpromise payments you can’t maintain. It may take some back and forth to reach an agreement. Having detailed documentation of your income, expenses, and budget will help strengthen your position.

If negotiations are successful and you uphold the new agreement, the creditor will stop the wage garnishment. Just be sure to get any deal in writing before payments start! However, if you default on the agreement, the garnishment could start back up again.

File for Bankruptcy

Declaring bankruptcy immediately stops any wage garnishment and wipes out many types of debt. Two common options are Chapter 7 bankruptcy which liquidates assets to pay back debt, and Chapter 13 bankruptcy which restructures debt under a court-approved repayment plan over 3 to 5 years.

While bankruptcy provides immediate protection, it also has serious long-term consequences. It will devastate your credit score and show up on your credit report for 7 to 10 years. You may have trouble getting approved for loans, credit cards, renting an apartment, or even getting some jobs. Certain assets like your home, vehicle, retirement accounts may be protected, but you could still lose valuable property.

Think carefully before taking this step. Meet with a bankruptcy attorney to review your specific situation. Weigh the pros and cons to decide if it’s the right choice. Bankruptcy stops wage garnishment, but the impact on your financial life may be too high a price to pay.

Challenge the Garnishment

If you have evidence the wage garnishment was done improperly or invalidly, you may be able to challenge it in court and get it overturned. Reasons a garnishment could potentially be found invalid include:

  • You were not properly notified of the debt or impending legal action
  • The court lacks jurisdiction over you or the debt
  • The garnishment amount exceeds legal limits
  • The debt has already been paid off or discharged
  • The creditor did not properly serve you notice of the garnishment
  • The statute of limitations has expired on the debt

To make a challenge, you must file legal forms with the court asking for a hearing. Be aware you usually need to take this action very quickly after receiving notice of the garnishment, often within 10 days or less. This is a complex legal proceeding, so consult an attorney experienced in consumer protection law to discuss your case and options. If the court agrees the garnishment is invalid, they will order it stopped.

File a Claim of Exemption

Even if the garnishment is technically valid, in many states you can file a claim of exemption to protect some of your wages from being taken. Exemptions recognize that people need a certain amount of income to cover basic living expenses before paying debts.

Common exemptions include a minimum amount per paycheck, or a percentage of disposable income after deducting taxes. For example, Florida protects the greater of 75% of disposable earnings, or 30 times the federal minimum wage per week. The amounts can vary widely by state, with some states protecting far more of your paycheck than others.

To stop a garnishment using exemptions, you must complete state-specific exemption forms and file them with the court. This usually needs to be done within a short timeframe after receiving notice of the garnishment starting. The court will review your claim and issue an order determining if any portion of your wages is exempt from garnishment.

Take Out a Consolidation Loan

Debt consolidation involves taking out a new loan to pay off multiple existing debts. The goal is to simplify payments and often lower interest rates to make repayment more manageable. A consolidation loan can also sometimes be used to stop wage garnishment, but there are risks to be aware of.

This strategy only works if the loan amount is enough to pay off the full amount owed on all the debts being consolidated. Be realistic about how much you can qualify to borrow based on your credit score and income level. Debt consolidation also does nothing to stop the garnishment unless you use the loan funds to immediately pay off those specific debts.

Even if you pay off the garnished debts, you still have the consolidation loan to repay every month. Defaulting on the new loan could just put you back in the same situation with creditors pursuing legal action. Be absolutely certain you can handle the new monthly payment before taking this approach.

Change Jobs or Move

In some cases, changing jobs or moving out of state may halt wage garnishment. This is because garnishment orders apply to specific employers. If you leave that job, the order would no longer be binding. However, the creditor could pursue a new garnishment order against your new employer.

Moving can also temporarily stop wage garnishment in the time it takes the creditor to domesticate the judgement to your new state. So while it may buy you some time, it’s rarely a permanent solution. The debt and garnishment order will eventually catch up with you.

It’s not recommended making dramatic life changes solely to avoid garnishment when there are better options available. However, if you already planned to change jobs or relocate, doing so sooner could suspend the impact of garnishment for a period of time.

Key Points

  • Changing jobs stops garnishment from the old employer, but creditors can pursue a new order against the new employer
  • Moving out of state pauses garnishment until the creditor domesticates the judgement in the new state
  • These are temporary solutions – the debt and garnishment will eventually resume
  • Only change jobs or move if you already planned to, not just to halt garnishment

Pros and Cons

Potential Pros:

  • Immediately stops wage garnishment, at least temporarily
  • Allows you time to improve your financial situation
  • Stops payments coming out of your paycheck each period
  • Gives you a clean slate with a new employer

Potential Cons:

  • Does not make the debt go away
  • Creditor can eventually garnish wages from new employer
  • Major life changes can bring their own stress and uncertainty
  • May need to change jobs again if garnishment catches up
  • Moving has costs and can disrupt family, social ties, kids’ schooling

Key Factors to Consider

  • How long can you reasonably expect payments to be paused?
  • Can you become financially stable enough to resume payments?
  • Do you already have a need or desire to change jobs or move?
  • Are you ready for the challenges of changing jobs or relocating?
  • Will stopping payments allow you to pay down debts faster?

Overall, changing jobs or moving to stop wage garnishment can make sense as a short-term strategy, but generally does not provide a permanent solution. Weigh the tradeoffs carefully for your situation.

Delancey Street is here for you

Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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