What is Wage Garnishment?
Under the North Carolina Wage and Hour Act, wage garnishment occurs when an employer is ordered to withhold a portion of an employee’s wages and divert it to pay off creditors. This does not apply to every kind of debt, and most personal debt like credit cards and car loans are not subject to these laws. Debts that can be collected this way are unpaid taxes, student loans, child support, or alimony.
Each state, however, has its own laws on wage garnishment. In some cases, a creditor can obtain a court order from another state to garnish wages within North Carolina, even if our law doesn’t provide for that particular type of debt. Under these circumstances, an employer may follow through with the garnishment without violating local laws.
How much can be garnished from my wages?
It’s important to note that even if your wages are affected by this, it’s unlawful to take your entire paycheck. Federal law mandates that even with a court order, creditors may only take up to 25% of your disposable income or any income that exceeds 30 times the federal minimum wage. These limits apply to all your creditors together, not each individual one. Disposable income in this sense refers to income left after standard deductions are taken such as unemployment insurance, mandatory retirement contributions, state and federal taxes, and social security.
There are also limits on how much certain creditors can take. For example, if you have federal student loans, they do not have to seek a court order to garnish your wages, but can only take up to 15% of your disposable income. Another common garnishment comes from alimony or child support. In some cases, if you’ve been ordered to pay support, it will be automatically deducted from your paycheck and sent directly to the recipient. In other cases, the law allows that 50% to 60% of your disposable income may be taken to cover child support.
How to Stop Wage Garnishment
The most effective way to stop wage garnishment is to seek the legal counsel of an experienced attorney who can advise you on the best course of action. If you feel that your wages are being garnished unjustly or incorrectly, you should fight it. If the garnishment is warranted, but you wish to instead pursue a payment plan with your creditors, we may be able to negotiate with them to come to an agreement where all parties are happy and the garnishments stop. In some of the most serious cases, your only option may be to file for bankruptcy, as this will often result in an automatic stay on garnishments once filed. However, not all chapters of bankruptcy will accomplish this.
Most individuals will file chapter 7 bankruptcy, and this type will generally stop wage garnishments. It will also sell off most of your non-essential assets to pay off creditors, and whatever cannot be paid off in this manner will be forgiven. However, not everyone will qualify for chapter 7 and you must pass a means test to determine if you make too much money to qualify. Additionally, Chapter 7 does not get rid of certain kinds of debt like alimony, child support, or student loans.
Individuals and organizations can file for chapter 13 bankruptcy which will also stop wage garnishment, but through different means than chapter 7. Chapter 13 bankruptcy restructures your finances and sets up payment plans with all your creditors which in many cases requires you to sell off some of your assets. Chapter 13 can be a good choice for some because it typically gives you three to five years to repay all your debts including domestic support obligations and can help you establish a sustainable payment plan.
How Legal Counsel Can Help
Because the guidelines around wage garnishments are affected by regional, state, interstate, and federal laws, it can make these cases incredibly complex. A skilled wage garnishment attorney can sort through all the details regarding your debt and your current finances, and help you work toward the best possible solution to stop wage garnishment. At Cannon Law Offices, PLLC, we’re committed to honest yet compassionate communication and we won’t sugarcoat the truth. We’re here to help you— the only way we can do that is by facing the facts.