Wage Garnishment is a process where someone you owe money (your “Creditor’) uses the power of the Courts to take away your property – typically wage garnishment or bank account garnishments. Before a creditor can use the power of the Courts they must first obtain a judgment against you (exceptions do apply for taxing agencies and government agencies). A judgment is simply a piece of paper signed by a Judge that confirms that you owe money to the creditor.
In order to obtain a judgment the creditor must first file a lawsuit against you. A lawsuit must be personally given to you or someone who lives with you so that you know you are being sued. If you get served with a lawsuit do NOT ignore it.
Attorney Michael O’Brien has met with hundreds of people over the years who have ignored lawsuits when times are tight and then been surprised by a wage garnishment when their finances improve.
5 Things to Know about Wage Garnishment
- A wage garnishment starts when a Creditor delivers garnishment papers to your employer. The creditor does NOT need to alert you in advance but must mail a copy to you.
- Once your employer has the wage garnishment they are required by law to withhold some of your money from your paycheck and send it on to the creditor. If your employer fails to do this then they can become liable for the debt to your creditor.
- A wage garnishment lasts for 90 days and can be renewed by the creditor multiple times until the entire debt you owe is satisfied. A garnishment can intercept 25% of your net paycheck so long as you retain a certain minimum amount of money – about $220 per week of work. So for example, let’s say you take home about $1,500 every two weeks. With a garnishment the employer would be required to withhold $375 from your net paycheck and send that money to your creditor leaving you with a take home of only $1,125.
- A bank account garnishment or credit union account garnishment starts when a Creditor delivers garnishment papers to your bank. Like a wage garnishment the creditor is NOT required to warn you in advance but must mail a copy to you. Once your bank receives a garnishment they must immediately review their accounts and freeze your money. Some exceptions do exist for funds which are not allowed to be frozen – see above for a more detailed explanation. A bank or credit union account garnishment is only effective one time – on the day it is delivered to the bank. So if you deposit new money in that account the next day it is not subject to the garnishment. However, there is no limit to the number of times a creditor can use a bank account garnishment to take your money.
- A wage or bank garnishment can be challenged under Oregon law. When you receive your copy of the garnishment papers a creditor is required to give you a copy of the Oregon Challenge to Garnishment Form. If you feel you have a valid right to challenge the garnishment then you must promptly fill out the form and file it with the Court that issued the judgment or garnishment and send a copy to the creditor, employer or bank that received the garnishment. Your garnished money will then be deposited with the Court who will hold on to the money until the Judge rules on your challenge. A hearing will be scheduled by the Court to hear your challenge and the legal basis for your argument. The burden is upon you to establish the legal basis for the challenge. Unfortunately, you are almost never allowed to challenge the underlying debt. You can challenge the math of the employer if they overpaid the creditor and you can challenge the bank if you believe that the garnished funds were protected by law.
State law challenges to garnishment can be tricky and require some knowledge of the law. In most cases, people who are being garnished owe other debts and would benefit from a bankruptcy filing. However, at Michael D. O’Brien and Associates we also help people negotiate with their creditors to avoid filing bankruptcy. For example, we recently helped a retired woman living on a fixed income negotiate with all of her creditors and avoid a bankruptcy filing. Another client owed one major creditor from a failed business and bankruptcy was an overkill solution for him. We negotiated a deal with that one creditor that allowed him to avoid garnishment and structure an extend repayment term of only part of the debt. This was a win-win as the creditor got some money and the client avoided bankruptcy.