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Wage garnishment can increase your debt woes

Wage garnishment means that a creditor has the legal backing to demand that your employer withholds a certain amount of your wages. Those wages are then paid to the creditor until the debt is paid off or the wage garnishment expires. The specific details of wage garnishments do vary with state law, but the general practice is the same and is governed by federal law.

Creditors cannot generally garnish wages until they sue the person who owes them money. The result of the suit is usually either a dismissal or a judgment against the debtor. If you can show you don't owe the money, have already paid the money or that the suit is past timely filing guidelines, then you can show up for the court date and present that information. In these cases, the case is likely to be dismissed.

If a judgment is obtained against you for the debt, the creditor can move on to wage garnishment, although they usually have to request the right to do so first. Once that right is obtained, the creditor sends notice of the garnishment to an employer. The amount a creditor can garnish from each of your paychecks depends on the state you are in and the type of debt you owe. Garnishments for unpaid private debt, such as medical or credit card bills, typically have to be under 25 percent of your disposable income. The actual amount is decided by a formula that involves deducting required amounts from your income.

Garnishments for tax debt, child support debt and some debts to state or federal agencies follow different rules and usually come with higher garnishments allowances. While you can't stop many of these collections with bankruptcy, you can stop private garnishment -- even if a judgment has been entered against you. By acting quickly, before garnishments are filed, you can work with a bankruptcy attorney to protect your income and overcome a serious financial struggle.

Source: Credit Union National Association Inc., "You Can Avoid Wage Garnishment," Monica Steinisch, accessed March 11, 2016

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