Bankruptcy stops wage garnishment. I can file your bankruptcy on line while you sit in my office. I obtain immediate proof of the filing and I can fax that to you the sheriff or other authority that has imposed the wage garnishment and get it removed immediately.
But what if you aren’t ready to declare bankruptcy? What are your rights as an employee whose wages been garnished?
I may be able to help you attack the wage garnishment without bankruptcy.
Only the wages of an employee can be garnished. If you are self employed or an independent contractor your compensation may not be garnished. For example, real estate sales people, commissioned sales agents are often independent contractors. In these cases an attempted garnishment can be blocked or removed.
But if you are operating as a corporation and you have your own corporation pay your wages these wages can be garnished. Since you have control over whether your own corporation pays you wages this should not be a problem.
There are limits on how much of your wages can be taken by a wage garnishment.
The basic rule of thumb is the maximum withheld is 25% of the disposable income (gross income after mandatory deductions such as social security, income taxes and the like). The ‘usual’ disposable income is around 75% of the gross. The withholding amount would be around 19% of the gross before other deductions if a claim of exemption is filed by the debtor. This is a rough estimate but will give you an idea of the amount to be withheld.
However there are special rules for garnishments for taxes.
The State of California can issue an earnings withholding order itself without going to court. If the garnishment is under an earnings withholding order issued by the state then the federal limits (25%) apply.
But the state can also go to court and request an earnings withholding order like any other creditor. In that case the amount of the garnishment can be more than the federal limit but you can ask the court to exempt the amount of your earnings necessary for your family’s support. However the garnishment will be at least 25%.
There are also special rules for spousal and child support. Garnishments for spousal or child support can usually be up to 50% of our disposable earnings.
In addition to the upper limits on garnishments established under federal law California has its own limitations on how much can be taken from your wages under a garnishment. California law provides an exemption from garnishment for the portion of your earnings that is necessary for your support or the support of your family. This exemption may allow you to keep more than the 75% allowed by the federal rules.
Thus, the amount of your earnings that can be garnished is computed as follows:
Step 1: The part of your earnings that is exempt under California law as necessary for family support is subtracted from your total earnings (after deduction for taxes and other withholding)
Step 2: The maximum amount subject to garnishment under federal law is calculated according to federal law (25%)
Step 3: Compare the amount in Step 1 and
Step 2. Whatever is smaller is the amount that can be withheld from your wages.
There are some exceptions to the above.
You may not use the family support exemption if any of the following apply:
The judgment was for a debt incurred for common necessities of life provided to you or your family.
The judgment was for a debt for personal services from one of your employees
Let’s say a creditor is attempting to garnish more of your wages than is allowed under law. Or what if you want to reduce the amount that is being withheld from your paycheck? What can you do about it?
You file with the levying officer (not the court) an original and one copy of:
• The official Claim of Exemption form (WG-006); and
• A Financial Statement (WG-007). [CCP § 706.105(b)]
Contents of claim of exemption: The claim of exemption must be executed under penalty of perjury and must contain the following:
• The amount of earnings needed to support the judgment debtor or his or her family (see item “2”);
• The address for service of all papers (item “3”);
• The amount of earnings the judgment debtor is willing to have withheld each pay period during the withholding period (item “4”) (if the creditor does not oppose the claim of exemption, such amount will be withheld); and
• The length of the judgment debtor’s pay period (item “5”). [CCP § 706.123]
FORM: Claim of Exemption (WG-006), available on the California Courts website (www.courts.ca.gov).
Financial statement: A completed financial statement must be attached to the claim of exemption. The Judicial Council Financial Statement form (WG-007) must be used (this is the same form that may be used to claim exemptions under the EJL; see ¶ 6:886 for discussion of contents).
• FORM: Financial Statement (WG-007/EJ-165), available on the California Courts website (www.courts.ca.gov).
Next, the levying officer will mail the above papers to the creditor.
If the creditor wants to try to contest your claim of exemption he must file a notice of opposition to your claim of exemption with the levying officer. He must also file a motion for an order determining the claim of exemption with the court.
He must deliver the opposition to the levying officer and file the motion with the court within 10 days after the levying officer mailed the exemption papers to the creditor. He must give you notice of the date of the hearing on the motion to oppose your claim of exemption. He might also serve you with a notice to produce documents at the hearing. The hearing will probably be in around 30 days.
If the creditor fails to follow the above rules then your claim of exemption is granted.
If the creditor did file the papers on time then the court holds a hearing on your claim of exemption. At the hearing the court will rule on whether your claim of exemption is correct. If the judge decides that money has already been withheld that should be returned to you he will so order.