How to Protect Against Wage Garnishments, Bank Levies
When you have creditors coming after you to repay the debt you owe, life can be stressful.
Unfortunately, when you owe money to others, you’ll have to pay it back somehow or consider bankruptcy.
Those you owe money to can come after you to get the money they’re owed in many ways if you aren’t paying your bills.
Creditors could try to use wage garnishments or bank levies as a way to pay for at least part of the amount you owe, if not the whole amount.
A wage garnishment is when a creditor gets your employer to pay part of your wages to the creditor. This happens before you get your paycheck and reduces your net pay.
A bank levy is when a creditor gets permission from the court to freeze funds in your bank account or remove funds from your bank account to repay a debt.
No one wants to find out on payday that their paycheck is smaller than anticipated due to a wage garnishment. Sadly, it happens on a fairly regular basis.
Similarly, no one wants to check their bank account balance and realize their account has been frozen or levied to pay off a debt.
Keep in mind, each state has different laws about wage garnishment, bank levies, and other factors. These could be important to your particular situation.
If you’re dealing with a wage garnishment or bank levy, you should seek out legal counsel. Legal counsel can give advice on your specific situation for your locality.
This article is not intended as legal advice. It is not intended to address any specific situation.
The Easiest Way to Avoid Wage Garnishments and Bank Levies
There is a super easy way to avoid wage garnishments and bank levies. Sadly, it is the least fun but is also the most effective solution.
Work with creditors to pay off debt
Don't wait for your creditors to try to collect money owed to them. Instead, work with your creditors to start making payments on the debt you owe.
If the idea of working directly with your creditors is overwhelming, you may want to consider talking to a certified credit counselor, such as those associated with the National Foundation for Credit Counseling (NFCC).
These counselors can take a look at your financial situation. They look into what options you have to please your creditors and manage the debts you owe.
NFCC credit counselors offer credit, debt, bankruptcy, and mortgage counseling among other services.
Counselors may suggest bankruptcy in the direst circumstances. They may suggest other solutions, too, including debt management plans and consolidation loans.
Make sure you review all options presented to you carefully.
Don’t feel obligated to accept a proposal until you’ve had ample time to review it. Make certain it will help you fix your debt problems.
Unfortunately, you probably don't have time on your side. You may need to take immediate action if you’ve received notice of a wage garnishment or bank levy.
This is especially true if you want to prevent them from going into effect in the first place.
How to Protect Your Paycheck from Wage Garnishments
Wage garnishments don’t simply appear out of thin air. In most cases, creditors must go to court to get a judgment to garnish your wages.
That said, not all types of debt need judgments to garnish your wages.
Some types of debt could allow for wage garnishment without a judgment including:
Notice of garnishment
You should be notified of garnishment before wage garnishment starts in most cases.
When you receive the notice, you typically have a short period to object to the garnishment.
If you do, you’ll usually be granted a hearing where you can state your case.
You should file a written objection with the court to fight the garnishment order. If you don't contest the garnishment, it will start based on the information in the notice.
Common exemptions from wage garnishment
One solution requires proving your income is exempt from wage garnishment.
Each state has different exemption laws. These laws determine which wages are exempt and how much income a creditor could garnish.
Some types of income are usually exempt in part or full simply due to the type of income it is.
- Child support
- Retirement income
- Disability income
- Social security income
Of course, if you owe certain types of debt, such as taxes to the federal government or student loan debt, the exemptions may not apply.
Head of household exemptions
It is understood that people still need to pay for living expenses while they’re paying off their debts during a wage garnishment. This is even truer when you are supporting dependents.
Each state is different. That said, most have head of household exemptions.
These exemptions allow you to keep a certain amount of your wages to pay for supporting your family.
Federal and state laws may limit garnishment amounts
Additionally, federal law limits wage garnishment to 25% of your disposable earnings or your wages that are more than 30 times the federal minimum wage, whichever is smaller.
Even so, wage garnishment rules for child support allow a much higher percentage of your wages to be garnished.
That said, laws in your state could provide even stricter limits. So what are some other ways you can use to protect your paycheck from wage garnishment?
Prove the statute of limitations has expired
Another way to fight a wage garnishment order is proving the debt has exceeded the statute of limitations.
Essentially, the statute of limitations is a fancy name for the laws that determine how long a creditor can legally go after you for a debt you owe.
If the statute of limitations has expired, you may no longer technically owe the debt.
Prove you don’t owe the debt
If you’re a victim of identity theft, your wages are being wrongfully garnished for a debt you don’t owe or for a debt you’ve already paid off, you should provide support for these claims in your hearing.
If you don’t owe the debt, your wages should not be garnished to pay for the debt.
Pay off the debt you owe
If the garnishment is in full effect and there is no other way to stop it, sometimes the simplest solution is the best solution. If you pay off the debt in full, the garnishment should stop.
Carefully consider bankruptcy
If you’re unable to repay your debts, your situation may warrant considering bankruptcy. Filing for Chapter 7 or Chapter 13 bankruptcy usually stops most wage garnishments.
You may still have to repay part or all the debt based on the result of your bankruptcy case, but the wage garnishment should stop at least temporarily.
How to Protect Your Bank Account from Bank Levies
Bank levies usually occur after a judgment has been made against you. Usually, they occur after you fail to pay the judgment as agreed upon.
Once you fail to pay a judgment, a creditor has to request the court issue an order to freeze or levy your bank account.
That said, some types of debt, such as tax debt, student loan debt or child support may not need a judgment before freezing your account.
Do bank levies affect additional deposits?
Once a bank account is frozen or levied, you could technically still deposit money into your bank account.
If the court order specifies an amount larger than your bank balance, additional funds deposited in bank accounts could also get frozen or levied.
To prevent future funds from getting levied, you may want to consider stopping all deposits. Make sure you don't forget about direct deposits of paychecks as these could get levied, too.
You may be forced to rely on cash or other bankless alternatives until the debt you owe is satisfied to avoid losing access to the money you need.
Funds protected from bank levies
Thankfully, some types of funds are protected from bank levies.
Specifically, Social Security and other particular government benefit payments could be automatically protected.
To be automatically protected, you must have them direct deposited into a bank account and leave them in that bank account.
The prior two months’ worth of direct deposits is usually the amount that is protected under law. This protection does not apply if you owe federal taxes or child support.
Any amount in your bank account above and beyond the two months’ worth of specific direct deposits can usually be frozen or levied.
If you don’t have your benefits direct deposited or you move the funds into another bank account, creditors could access your Social Security funds.
This is mainly true if you don’t claim your exemption during a hearing.
Banks only have to look for direct deposits directly from the benefit source when calculating how much may get frozen or levied.
Another downside to moving Social Security funds or not getting them direct deposited is the fact that your money could get tied up even though it is exempt.
The money won’t typically be unfrozen until after a judge rules on your particular case. This could delay access to the money you need to pay for your day to day expenses.
Wage Garnishments and Bank Levies Are No Joke
If you find yourself being notified about a wage garnishment or bank levy, time is of the essence. Don’t wait around thinking you can deal with these major issues later.
Instead, research why your wages are being garnished or your bank account is being levied. In most cases it’s best to consult with a legal professional to determine your best course of action.