Dealing With Garnishments Outside a Bankruptcy
You might be feeling a loss of control if you see that your paychecks, which you work so diligently and hard for, are being reduced because there is a garnishment order against you. Your financial situation, which was already less-than-stable, is a little more dire thanks to one or more judgments. Fortunately, there is a cap on the amount that garnishers can take out of your paycheck, but the amount depends on the type of debt you owe.
When Can Your Wages Be Garnished?
Apart from a bankruptcy filing, creditors (people or entities to whom you are in debt) must generally file a lawsuit against you, prevail in the lawsuit as the plaintiff, and secure a money judgment from the court in order to garnish your wages. There is no action needed on your part – your employer will automatically deduct the ordered amount from your paycheck.
However, particular debts do not require a court judgment in order to be able to garnish your wages. These debts include:
- Child support. This is arguably the most common type of debt that is garnished from individuals’ paychecks. According to federal law, up to 60 percent of your disposable earnings from your paycheck can be garnished to satisfy court-ordered child support payments.
- Unpaid taxes. If you owe back taxes to the IRS, the federal government can obtain an order to garnish a significant amount of your disposable earnings each paycheck. Your number of dependents and deductions dictate the exact maximum amount the IRS can garnish. In some cases, the state can also garnish your wages for unpaid state taxes.
- Student loans in default. Up to 15 percent of your disposable earnings can be taken if the U.S. Dept. of Education obtains an administrative garnishment judgment.
What Are Your Rights in Michigan?
While some states have stricter caps on how much of your paycheck can be garnished, the state of Michigan defers to the federal limit, which is 25 percent of your disposable earnings. Disposable earnings are designated as your take-home income after taxes (like Social Security and Medicare) have been deducted. If you have multiple wage garnishment orders against you, the cap is still 25 percent. So, each of your creditors will be fighting for their share of the 25 percent.
Your employer will be notified if your wages are being garnished. However, you are legally protected from getting fired, losing a job offer, or being discriminated against in the job search process due to your garnishments – if you have only one garnishment order. Unfortunately, federal law does not prevent an employer from firing employees who have multiple wage garnishment orders.
Contact an Experienced Business Law Attorney at Maxwell Dunn PLC
Being informed that your paychecks will soon be garnished is frustrating and requires a good amount of adjustment on your part. In addition to your paychecks, your bank accounts and tax refunds can also be vulnerable. If you suspect that your assets are being unfairly taken from you through garnishment, get in touch with our business law attorneys today and let us discuss your options with you.