If you're struggling to pay off a credit card or other type of debt, you may be at risk of having your wages garnished. Not only does that mean less income to pay your other bills, but you'll also end up paying extra court fees.
The first step to combating wage garnishment is to learn what you're up against. You should know that a credit card company or other business cannot collect money from your paycheck without a few conditions in place:
The creditor must take legal action against you. The good news is that you won't suddenly notice a reduction in your paycheck. Tennessee law requires a creditor to first file a court complaint against you. It also must notify you of this complaint with a summons, including a court date when you can defend yourself. Do not ignore this opportunity; if you don't show up, chances are good that the creditor will be granted permission to garnish your wages. Even if you appear and the judgment goes through, you still have 10 days to file an appeal before the order goes to your employer.
Your employer must consent to the garnishment. In order to start the process, the company you work for must answer the court and notify you of the order. This notification gives you further warning that a portion of your wages will be withheld no more than 30 days after your employer is served.
The garnishment can't exceed a certain amount. State law places limits on the amount that can be withheld from your paycheck to pay off debt. In Tennessee, the limit is the lesser of two calculations: either 25 percent of your disposable income or the amount by which that disposable income exceeds 30 times the federal minimum wage, whichever is less. For example, let's say your disposable income -- in other words, your wages minus federal payroll taxes and your health insurance premium -- is $1,000 per month. The minimum wage (currently $7.25) multiplied by 30 is $217.50. Subtract this number from $1,000 and you get $782.50. The first limit (25 percent of $1,000 equals $250) will apply because it's the lesser amount.
There are variations on these laws for certain circumstances. The government can recoup debts, such as back taxes, without a court order. And if your debt is in the form of overdue child support payments, you may see a higher percentage taken out of your paycheck.
If you want to stop or prevent wage garnishment, bankruptcy may be your best option, particularly for consumer debt. An experienced, board-certified bankruptcy attorney can give you a full picture of all your debt solution options and help determine the best one for you.