Wage Garnishments, Creditors, Judgments, and the "Automatic Stay"

One of the overwhelming concerns posed by debtors faced with financial difficulties is whether creditors may "lawfully" garnish their wages once a judgment is entered in a creditors favor? The short answer is yes; however, subject to the limitations set forth by Federal and State laws.

The Consumer Credit Protection Act ("CCPA") provides certain restrictions on how much of one's earned wages can be garnished in a given workweek. The purpose for such protection is to prevent creditors from overreaching and attempting to garnish an entire paycheck(s). Also, New York State has enacted substantially similar legislation to effectuate the intent of Congress and the "CCPA."

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The following is an analysis of when and how much creditors may garnish from your weekly paycheck(s):

First, subject to a few exceptions discussed below, in New York State a garnishment CANNOT exceed 10% of a debtor's gross income OR 25% of the debtor's disposable income (income left over after tax deductions, union dues, etc.);

Second, in cases where 25% or more of the debtor's weekly disposable income is being deducted pursuant to a court order for the payment of alimony, support or maintenance, no further garnishment is permissible. Why? The law aims to protect those individuals under previous court-ordered obligations from insolvency;

Third, if your disposable income per a week doesn't exceed thirty times the Federal minimum hourly wage, which is currently ($7.25 * 30) $217.50, then under Federal law creditors cannot garnish your wage - period.

What are some of the exceptions where the above-stated limitation(s) may not be applicable and garnishments can exceed the above-listed amounts?

1) any order of any court of bankruptcy under chapter XIII of the Bankruptcy Act;
2) any debt due for any State or Federal tax;
3) any debt pursuant to a court order for the payment of support or maintenance for family members or former spouses;
4) other debt given priority by law not already mentioned herein.

What if there is more than one judgment? Generally, income executions are prioritized by the order in which they are delivered to the Sheriff; however, garnishments for alimony, support or maintenance always given priority due to the nature of the garnishment.

What is the process/procedure for executing the judgment? The execution of a judgment in the context of garnishments is a two-stage process. First, the sheriff serves the execution on the debtor at his or her residence. If the debtor does not begin making payments within twenty (20) days, then the sheriff notifies the employer via documentation so that garnishing can begin.

Can I be discharged because my wages have been garnished? Obviously not! Section304 of the "CCPA" states that "[n]o employer may discharge any employee by reason of the fact that his earnings have been subjected to garnishment for any one indebtedness." The federal government is attempting to prevent possible retaliatory or discriminatory layoffs by debtors' employers.

HOW CAN BANKRUPTCY HELP? Once a debtor files a Chapter 7 or 13 pursuant to the Bankruptcy Code, they are then under the protection of the "Automatic Stay" which "stays/stops" creditors in certain instances from attempting to collect on an outstanding debt. As a part of the automatic stay, a debtor's paycheck(s) that was once being garnished will no longer be garnished so long as proper procedures are followed. Also, that debt may be discharged in a successful bankruptcy proceeding.

WHY STOP THE GARNISHMENT? In reality, most debtors are in debt due to unforeseen circumstances and/or financial difficulties. Certainly, if they could pay their creditors - they would. However, not only aren't they able to pay their creditors, but they are in need of the week-to-week paycheck(s) and simply can't afford garnishment(s). Because of the automatic stay, those same debtors now have a chance to use the funds for ordinary and everyday expenses like putting food on the table, traveling to/from work, and other day-to-day living expenses.

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