Most Americans owe someone something and we are living in a day and time where creditors are very creative in their ways of making you pay. One of these ways is through a wage garnishment.
Before panic sets in and you start thinking that every creditor can automatically begin to garnish wages from your check, stay calm — there are a few steps they must take before this happens. First, the creditor must sue you for the payments you owe them and then they must receive a court judgment. This involves several steps. After you are served with a lawsuit, you have 20 days to respond. After your response is filed with the Court, a trial date is set. If you fail to appear at the hearing, or fail to respond to the lawsuit, the plaintiff obtains a judgment by default against you. If the creditor wins at trial, they will then obtain a judgment against you. Either way, a judgment may then be used to place a lien on your house or car, or to garnish your wages.
Beware of a common creditor harassment technique — threatening you prematurely with a wage garnishment. Unless the above steps are followed, then a creditor cannot garnish your wages. You should speak with a lawyer if a debt collector falsely threatens you.
Once a creditor obtains a judgment against you, they can then obtain a garnishment order that is sent to your employer to attach your wages. This court order requires your employer to withhold a certain amount of money from your paycheck and then send it directly to your creditor. After federal taxes, health benefits and retirement savings are taken out of your check, Delaware law limits the garnishment amount to 15% of your pay, with some exceptions. If you have more than one wage garnishment, the total maximum is still only 15% for all creditors. If you have unpaid income taxes, court ordered child support, child support arrears or default student loans, these particular creditors do not need a court judgment in order to start garnishing your wages.
One common mistake that I see is people suffering from the loss of income due to a wage garnishment. A bankruptcy filing, either Chapter 7 or Chapter 13, will immediately stop a creditor’s wage garnishment, and if more than $600 has been taken from your pay within 90 days prior to the date you filed bankruptcy, you may be able to get some of that money back.
The most common mistake that I see people make is ignoring the lawsuit. This problem is so prevalent that debt buyers have created an entire business model banking on the fact that a high percentage of debt lawsuits result in a default judgment. Just because you are being sued, does not mean the person suing you automatically wins.
You can best fight back by reading the paperwork very closely. This often reveals common problems with the lawsuit, including: the case is barred by the statute of limitations (3 years in Delaware, 4 years for open-ended accounts); there is no proof that the specific individual account being sued on was sold; there is no contract attached; the “Bill of Sale” is not between the alleged seller and the alleged debt buyer, and many others. The best thing to do is to contact an attorney immediately after you are served with the lawsuit, to consider your options for fighting the lawsuit, negotiations, or even bankruptcy.