If your employer is withholding a portion of your wages for back taxes, child support, alimony, a student loan debt, or other debt, it’s a wage garnishment. How should you respond to the garnishment of your wages? When should you contact a North Carolina wage garnishment attorney?
Are wage garnishments allowed in North Carolina? What are your rights – and what are your legal options – if you are the target of a wage garnishment? Can you be fired from your job if a garnishment is imposed on your wages?
If you will continue reading this brief introduction to wage garnishments in North Carolina, these questions will be answered, and you will also learn what legal steps a North Carolina wage garnishment lawyer may be able to take on your behalf.
How Do Wage Garnishments Work in North Carolina?
North Carolina wage garnishment laws permit wage garnishments in very limited circumstances, and the state does not generally allow wage garnishments as a debt collection method. With one exception, North Carolina residents are protected from wage garnishments by private creditors.
Wage garnishments for debts such as overdue mortgage payments, car payments, credit card payments, and loans are not allowed in North Carolina, with this exception – if the creditor obtained a judgment against you in another state but you now reside in North Carolina.
However, the U.S. Department of Education, the Internal Revenue Service (IRS), and state and local child support collectors and tax collectors are allowed to impose wage garnishments.
Wage garnishments may be imposed for overdue child support and alimony, unpaid taxes, defaulted student loans, and unemployment benefit overpayments. In North Carolina counties where ambulance services are operated by a county or municipal agency, payment for ambulance services may also be collected through a wage garnishment.
What Part of Your Wages Can a Creditor Take?
Federal law limits what may be garnished, in most cases, to one quarter of your disposable earnings (what’s left after mandatory deductions) or the amount by which your disposable earnings for that week exceed thirty times the federal minimum wage, whichever is less.
Overtime pay and bonuses also may be garnished, and an employer may charge a service fee for every paycheck that is subject to a wage garnishment.
Special Rules Apply for Child Support
All court orders for child support include an order to withhold wages for that support. A child’s best interests are a priority, so if a parent also supports another spouse and/or another child, up to half of that parent’s disposable earnings may be garnished for child support payments.
If you do not support a spouse and/or another child, as much as sixty percent of your disposable earnings are subject to a wage garnishment for child support, and another five percent may be garnished if you are over twelve weeks in arrears.
If Your Wages Are Garnished, Is Your Job at Risk?
Garnishments are an inconvenience to employers, but federal law offers some job protection if your wages are being garnished. An employer may not retaliate against, discipline, or fire an employee because that employee’s wages are being garnished – the first time.
However, if more than one wage garnishment is imposed on a worker’s wages at the same time, the worker loses that legal protection, and the employer may terminate the worker at will.
Is Bankruptcy an Option?
Bankruptcy cannot stop a wage garnishment for ongoing or past due child support or alimony, but it can stop a wage garnishment for back taxes and student loan debt.
Bankruptcy can also assist in resolving the back tax debt. A Chapter 13 bankruptcy may provide a way to pay the back tax debt over 3 to 5 years or possibly discharge that debt depending upon the type of tax debt and if the tax debt fits criteria outlined in the bankruptcy code for discharge of tax debts. Both Chapter 13 bankruptcy and Chapter 7 bankruptcy can stop a garnishment for student loan debt even though that debt is not dischargeable.
The bankruptcy will stop the garnishment, allow you to discharge other debt and free up income to help you to pay the student loan with a repayment plan that may be more suitable for you at a later time. You may also choose, if feasible, to repay the student loan debt through a Chapter 13 bankruptcy repayment plan over 3 to 5 years.
If you reside in North Carolina and your wages are being garnished by a private collector in a different state allowing wage garnishment for something like a mortgage, car loan, credit card debt, or other unsecured debt, filing for bankruptcy will stop the wage garnishment.
If a creditor in another state that allows wage garnishment has obtained a judgment against you and is garnishing your wages in North Carolina, the smart first step is to contact a North Carolina wage garnishment attorney at once to discuss bankruptcy options and other options that may be available.
How Should You Respond to a Wage Garnishment?
Your response to a wage garnishment in North Carolina will depend on a number of factors, including the reason for the wage garnishment, the amount that’s being garnished, your employment situation, your financial situation, and the amount of your other debts.
While bankruptcy will not stop some wage garnishments in North Carolina, such as alimony and child support it can stop wage garnishments for tax debt and student loan debt and may be a viable option to help eliminate certain debts or reorganize certain debt to improve your financial circumstances at the present time and for the future.
Discharging other debts – medical and credit card debts, payday loans, bank overdrafts, personal loans and other unsecured debts for example – may help you organize your finances so that you can pay off the wage garnishment debts more quickly and easily. A Chapter 13 bankruptcy, called a reorganization bankruptcy, might be particularly helpful.
While bankruptcy carries some negative consequences, and may not be for everyone, a Chapter 13 bankruptcy protects your property while stopping a wage garnishment. A Chapter 13 bankruptcy reorganizes your debt in a proposed repayment plan of a minimum of 3 years and a maximum of 5 years. This does not mean you have to pay back all of your debt. The plan proposes to pay the debt that you’re required to pay based upon your income, the type of debt, and the property you own. You could pay back as little as 0% of your unsecured debt up to 100% of your unsecured debt depending upon your particular circumstances. The chapter 13 bankruptcy also provides a way to catch up secured debt payments such as mortgages, car loans and other secured loans.
A Chapter 7 bankruptcy may also be beneficial to stop a wage garnishment. A Chapter 7 bankruptcy will stop a wage garnishment, except for child support and alimony. The chapter 7 will also discharge unsecured debt, including but not limited to credit card debt, medical debt, personal loans, payday loans, and bank account overdrafts. By eliminating and discharging these debts in a Chapter 7 bankruptcy you may free up income to provide a way to pay the child support or alimony and pay any back taxes or student loans that might otherwise not be dischargeable in a bankruptcy.
What Else Should You Know About Wage Garnishments?
If your wages are being garnished by the U.S. Department of Education, the Internal Revenue Service, the North Carolina Department of Revenue, another governmental agency, or a court, these are your options:
- Pay the amount that you owe in full. When that amount is paid, your employer will be released from the obligation to garnish your wages, and you will again receive your full pay.
- Set up an installment payment agreement. The IRS and the North Carolina Department of Revenue routinely set up these agreements for back taxes. A North Carolina wage garnishment lawyer may also be able to work out payment agreements for other debts.
- Leave the garnishment in effect. If you cannot pay the amount that you owe in full or set up an installment payment agreement, your best option may be to leave the wage garnishment in effect.
- As stated previously, a Chapter 13 bankruptcy will stop the wage garnishment and may provide a way to repay the tax debt or student loan debt over 3 to 5 years or possibly discharge the tax debt if the tax debt fits certain criteria. A Chapter 7 bankruptcy will stop the wage garnishment to eliminate some of your debt to free up income to pay the tax debt or student loan debt if that is more feasible for you than a Chapter 13 bankruptcy.
Depending on your personal circumstances, you may have other options. What is certain is that if you are targeted with a wage garnishment, you will need personalized advice and guidance from a North Carolina debt attorney, and you will need to contact that attorney as quickly as possible.