The only recourse for a consumer after a judgment has been rendered is to ask the court to adjust the amount of the garnishment if the reduction in pay severely impacts the consumer's ability to support himself and any dependents. Also, if a judgment is ruled upon in a state where the garnishment law is different than the federal law, the law requires the court to adjust the garnishment to the lesser amount.
Don't bury your head in the sand
When wages are attached, or "garnished," money is deducted from the debtor's paycheck and sent to the creditor. This form of debt collection is most often seen in delinquent tax situations and back-owed child support, but credit card debt is not immune. When other assets, such as property, are attached, a lien is associated to the property for the judgment amount -- or for as much of the judgment amount as can be secured -- so that when a property is sold, the money obtained from the sale would be distributed first to the creditors.
"Unfortunately, many consumers bury their heads in the sand when the notices start coming in," says Rosenthal. "They are usually overwhelmed with creditors and by ignoring the situation, the lawsuit goes through and the consumer is faced with garnishment and minimal alternatives," he says.
According to NFCC's Cunningham, "The smart consumer will reach out for help before he digs too deep of a financial hole. Judgments and garnishments can often be avoided if the problem is addressed early on."
Some funds exempt from garnishment
When an employer is notified of a judgment requesting wage garnishment, only a certain percentage of wages can be withheld -- according to the total of disposable earnings of the employee -- allowing the employee some income to live on, according to Title III of Consumer Credit Protection Act. Money also protected from garnishment are deductions that are legally required to be paid by the employee, such as federal, state and local taxes, unemployment insurance, state employee retirement system payments and Social Security.
State and federal law regulate the amount of money that may be garnished from a consumer's wages or bank account.
-- Gail Cunningham, National Foundation for Credit Counseling
According to the U.S. Department of Labor, Title III "also protects employees by limiting the amount of earnings that may be garnished in any workweek or pay period to the lesser of 25 percent of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage prescribed by Section 6(a)(1) of the Fair Labor Standards Act of 1938. This limit applies regardless of how many garnishment orders an employer receives."
So, let's say an employee nets $600 a week. Under the 25 percent formula, the maximum garnishment amount to $150 (25 percent of $600). Or, using the minimum wage formula, the maximum garnishment amount is $403.50 (30 times the minimum wage of $6.55 is $196.50, which is then subtracted from the $600 net compensation). Therefore, since the rule says to use the "lesser" amount, the maximum garnishment would be $150.
Garnished wages vs. bank account garnishment
Cherner points out that "There are two different forms of garnishment: Wage and nonwage. Nonwage garnishment is a procedure where a judgment holder attempts to garnish funds in a bank account. Wage garnishment is used when it is determined the consumer is gainfully employed and has sufficient earnings to attach."
If the debtor is not gainfully employed, then the garnishment process begins when a debtor's bank receives a court judgment requesting a debtor's account be frozen. According to AmericanBanker.com, however, garnishing poses enormous paperwork to banks, especially when the bank is inundated with restraining orders on account funds. Additionally, federal law prohibits some monies -- Social Security, disability or veteran's payments, for example -- from garnishment, further complicating the process for both the bank and the consumer. Conversely, if you owe federal or state debt, such as back taxes, not only does the government not need a court order to attach your bank funds, they can also tap federal and state government payments.
Consumer advocates take issue with the current practice of freezing all bank funds and placing the onus on the consumer to prove which funds are exempt. Banks say they must comply or suffer potential liability under state laws and are saddled with segregating the funds.
Recently, the New York Legislature passed a bill intended to ease up bank garnishment processes. The bill mandates that the first $2,500 in a debtor's account remain untouched if that account received protected electronic deposits in the 45 days prior to the bank's receipt of the restraining order. The bill also caps the number of possible account freezes at two per account per year. Similar laws have been enacted in California and Connecticut. The New York bill is pending signature by the governor and many hope similar rules become the basis for a federal model.
Federal benefit agencies, such as the Social Security Administration, are also collaborating to provide specific guidance to financial institutions on preventing garnishment of exempt wages. These come in addition to some proposed interagency guidance suggested by bank regulators last September. .
Laws on garnishing
Garnishment policies vary from state to state and bank to bank, so it is important to understand your state's laws on the matter.
NFCC's Cunningham adds, "There are some states in which garnishment is approved and clients should be aware if their debt occurred in a garnishment state or a state wherein garnishment is prohibited. And, although credit card debt is often sold to a third-party collector, it can be -- and often is -- subject to wage garnishment."
"State and federal law regulate the amount of money that may be garnished from a consumer's wages or bank account. State law regulates the amount of time a consumer's wages or bank account may be garnished," says ACA's Cherner.
Cunningham also points out: "Garnishment can occur in addition to other existing debt issues. Whereas a counseling agency may be able to negotiate lower payment arrangements with a creditor, once a debt becomes garnished, neither the consumer nor the counseling agency has any latitude. The payment arrangement is set by the court." This means that garnishment amounts, timing and terms are legally determined and handled on a case-by-case basis.
"A garnishment is a serious legal step, one that significantly impacts the consumer. Not only does his credit report receive a major negative ding, but his disposable income is decreased. It is at this point that the wise consumer will seek the help of a legitimate credit counseling agency. Living expenses need to be reviewed, and remaining debts need to be addressed. This can seem overwhelming, but help is available, and the sooner they reach out for assistance, the better off they're going to be," says Cunningham.
Source:
http://www.creditcards.com/credit-card-news/wage-garnishment-for-credit-card-debt-1282.php