Wage garnishments to someone living paycheck to paycheck can easily take away the ability to keep up with other financial obligations. The struggle to stay on top of debts and keep a home or feed a family can become overwhelming. You can’t always stop a garnishment, but bankruptcy can make it easier to live comfortably.
Debtors often find themselves unable to meet their basic needs when they experience a garnishment due to three common types of debt. Student loans, child support, and excessive medical bills are a problem for many people. Bankruptcy can help in these instances but in different ways. Discover what anyone facing a garnishment should know.
1. Unpaid Medical Bills
A lengthy illness can cause people to accumulate an unimaginable amount of medical debt. Even a simple visit to an emergency room or a short stay in a hospital may empty a bank account. Late fees and other administrative costs from an attempt by the medical facility to collect the debt can add to the total.
Many people try to make payment arrangements and keep up with the debt, but this is not always possible. Once people miss enough payments or fail to stay on track with an established payment plan, the hospital or other facility may file a lawsuit to request a wage garnishment. The debtor can delay the process by filing an objection, but this is only a temporary solution.
Garnishments for this type of debt can take 25 percent of disposable earnings or disposable earnings that are 30 times the hourly minimum wage set by federal law. Disposable income is what remains after paying taxes and other payroll deductions. Filing bankruptcy can stop the garnishments and erase medical debts.
2. Federal Student Loans
Unlike hospital bills, garnishments for federal student loans do not need a court judgment to begin. If a debtor fails to make payments or pays only partial loan payments, the U.S. Department of Education can remove money from the individual’s paycheck to pay back the loans.
Legally, the garnished amount could be up to 15 percent of disposable earnings. The government paused wage garnishments for student loans during the COVID pandemic, but this pause was established as a temporary measure and did not erase the debt.
Bankruptcy does not automatically eliminate student loans, but filing proves a financial hardship, so the government will consider canceling the debt. The debtor needs to prove that their income after bankruptcy is not enough to have a minimal standard of living if the wage garnishment continues.
You have no guarantee the government will agree to forgive the entire debt. The decision depends on the balance of the loans and the income of the debtor. Other possibilities rather than a full discharge include a partial discharge to reduce the amount owed, a lower interest rate, or a lengthier repayment schedule to lower the monthly cost.
3. Child Support Payments
Wage garnishments for child support are often the most devastating. Garnishments up to 50 percent of disposable wages are allowed for those with other dependents. People with no dependents could have up to 60 percent garnished from their paycheck. The government can also take an additional 5 percent if the person owes back support of at least 12 weeks.
Bankruptcy cannot stop or lower a wage garnishment for child support. It does offer the opportunity to eliminate other debts to enable the payer to have a more comfortable standard of living.
Wage garnishments for student loans, child support, and unpaid medical bills affect many Americans and make it difficult to afford the basic needs of life. At Wiesner & Frackowiak, LC, we work with our clients to find the best option to help them live a more comfortable life. Contact us today to schedule a consultation.