When you receive a garnishment order, you can challenge it. If not challenged, the court ruling will instruct you to begin garnishing your employee’s disposable earnings (income left over after legally required deductions are made).
Once a garnishment begins, several ways exist to work out an arrangement with the creditor. You can also file for bankruptcy, a viable option if you do not have enough money to pay the debt.
Know Your Limits
Knowing your limits is essential when dealing with wage garnishment as a business owner. Creditors usually only pursue garnishment after attempting other methods to recoup debt, such as negotiations with the borrower and structured loan repayments. They can petition the court to garnish your employee’s wages if these efforts fail.
The Consumer Credit Protection Act legally limits the amount of an employee’s wages that can be paid. A person determines this cap “disposable earnings,” or the amount left over after all required deductions (including income taxes, Social Security, and state unemployment insurance) have been made from their paycheck.
When dealing with garnishments, carefully read all the paperwork you receive from employees’ creditors and the courts. If you need help with how to proceed, contacting an experienced wage garnishment attorney for guidance is best.
Work With Your Creditor
A creditor may initiate a wage garnishment if they are not obtaining the money they require from your employee. It means that a court or other authority has ordered your employer to take money from your employees’ paychecks to pay the debt. Different sums may garnish depending on the type of debt and whether it is a court or government order. You must be familiar with local and federal regulations governing wage garnishment payroll.
Sometimes, you can work out a payment plan with the creditor. You can also find debt relief through a nonprofit debt counselor or bankruptcy. If you cannot agree, the best thing is to contact a lawyer who specializes in consumer protection or debt collection law.
When you get a garnishment order, notify your employee immediately. It is also a good idea to read the order carefully and comply with all requirements, including when it needs to start and stop. You should also keep accurate records of the amounts withheld.
Keep Track of Your Wages
Wage garnishments are a normal part of business, but they are often difficult to factor into payroll operations.
A garnishment is an order from a court that requires your employer to withhold money from your paycheck and send it directly to the person or creditor who owes you the debt. It usually happens because you need to catch up on your bills, and the creditor wants to collect the amount owed until it is paid or otherwise resolved. That is standard for student loans, mortgages, and other consumer debts.
It is essential to check the order for details on how much to withhold and any specific federal or state restrictions before making deductions. That is also vital to keep accurate records of each garnishment and its status, as the governing agency will ask for a report once you have finished processing the payments. It is also essential to notify the governing agency if an employee’s employment status changes, like if they terminate or resign.
The most important thing to remember is that a garnishment can only stop once the debt is paid or otherwise resolved. The creditor or agency that filed the garnishment will tell your employee when it is time to stop, and they will often communicate this through a new order or another notification method. That is why staying in contact with your creditor or agency is crucial, and seeking legal help is necessary.
Make Arrangements with Your Employee
Creditors or government agencies order wage garnishments, so your employees need to collaborate directly with them if they want to challenge the garnishment or decide to pay off their debt. That is especially true for garnishments involving debts, taxes, or child support. You can offer your employees guidance and help them find resources, but if they want to talk directly to their creditor or get help working out a payment plan, they should manage it between themselves and the creditor. Some banks and government agencies also set rules on garnishment, so your employees should also investigate these details.
A creditor usually only takes a certain amount from your employee’s paycheck until their debt is paid or resolved. For example, the debt collector may agree to a repayment plan or settle for a lump sum if they are behind on student loans. However, the creditor may still need to file a garnishment order with the court, so the employee should check on this as soon as they receive notice.
If an employee has a garnishment, the deduction should appear in their pay stub under the “Deductions” section. It will be clearly labeled with the purpose of the garnishment and what percentage of their gross pay was taken out of that pay period. Your employee should also know they can ask the creditor or debt collection agency how much owed, if it has been paid off, and when the garnishment will end. Your payroll services provider should be able to provide you with this information as part of your HRIS system.
Contact a Wage Garnishment Attorney
When a creditor obtains a court order or notice from a government agency that they are attempting to garnish an employee’s wages, the employer must begin withholding funds immediately. The amount withheld will list on the order and must be sent directly to the creditor seeking garnishment. In some cases, employees have the right to challenge the garnishment in a court of law and may be able to regain some or all the money that is withheld from their paychecks.
The significant wage garnishment issue can have long-term financial consequences for an employee. In addition to hurting budgets, it can also damage credit scores. Because of the severe nature of this type of debt collection, it is vital for individuals who find themselves in this situation to work with creditors and consider their options.
One option is negotiating a settlement with the creditor, which can help keep the debt manageable. Another option is to seek debt relief by filing for bankruptcy. However, it is essential to note that bankruptcy can damage credit scores and will remain on the report for up to 10 years.
If you have been served with a wage garnishment, it is vital to contact a garnishment attorney as soon as possible. It is essential to do this for assorted reasons, including the fact that it may be possible to challenge the judgment in court. If you can prove that the debt is not yours or that the creditor did not follow proper procedure, it could be possible to have the garnishment lifted.