Wage garnishment is one of the tools judgment creditors can use to collect from their debtors. Under a wage garnishment scenario, a debtor’s employer is compelled to withhold a certain amount from the person’s paycheck and forward it to the creditor or its representative. Sometimes wage garnishment makes sense. Other times it does not.
Whether or not wage garnishment is a good idea depends on circumstances. If it is not the best course of action, there are other tools creditors can utilize to collect. When it’s the best option, garnishment can bring a neat and tidy end to an otherwise unpleasant situation.
How Wage Garnishment Works
Wage garnishment is a simple process to understand. A judgment creditor takes a court issued Writ of Garnishment to the local sheriff’s department. The sheriff then delivers a copy of the order to the judgment debtor’s employer. The employer is now compelled to withhold money from the debtor’s paycheck and forward it to the creditor.
Most states provide for bringing employers to court for refusing to comply with a garnishment order. Employers obviously do not want to be put in that situation. More often than not, they comply with writs of garnishment.
Garnished Amounts Are Limited
Wage garnishment is not always the best option for two reasons. First, not all states allow it. There are a small handful of states that bar wage garnishment for anything other than unpaid taxes, unpaid fines and penalties, and child support and maintenance payments.
The second issue is that states limit the amount that can be garnished. Every state that allows the practice limits garnishment to a certain percentage of the debtor’s disposable income. If you are not familiar with the term, disposable income is money left over after the debtor pays all of his or her essential bills.
When Disposable Income Is Minimal
We finally get to the question of when it makes sense to garnish wages. Simply put, there needs to be enough disposable income to make garnishment worthwhile. If a debtor’s disposable income is minimal, the creditor might not get enough from each weekly paycheck to make a meaningful difference.
On the other hand, a debtor with sufficient disposable income might prefer wage garnishment over some of the other options. At least wage garnishment offers them the opportunity to gradually pay overtime through a forced payroll deduction. As uncomfortable as that might be, it’s far better than having a lien placed on one’s home or having property seized by the sheriff.
There May Be Better Options
If a debtor’s disposable income is minimal, there may be better options. Salt Lake City’s Judgment Collectors suggests taking a serious look at the individual’s assets. For example, a judgment debtor might have an inheritance tied up in a trust. Even without sufficient disposable income to make garnishment worthwhile, that inheritance could be the key to getting things taken care of.
Debtors have all sorts of assets that could be leveraged for payment. Everything from jewelry to collectibles to securities is worth looking at. However, states have their exempt and non-exempt asset lists. Anything on the exempt list cannot be touched to satisfy a judgment.
At the end of the day, creditors can approach judgment collection from many different angles. There are times when wage garnishment makes perfect sense. It is the right tool for putting a judgment to rest. In other cases, though, wage garnishment makes little sense at all. Creditors need to look at the details of their respective circumstances to determine the best course of action. Sometimes that is easier said than done.