When you owe money and do not have the resources to pay the debt in full immediately, creditors may choose to take you to court. If they have evidence validating the debt and their claim that you fell behind on payments, they could secure a judgment related to the debt that eventually results in a garnishment of your wages.
Unlike voluntary debt repayment, wage garnishment occurs without your permission or involvement. The creditor that secures the judgment can receive some of your wages before your employer ever releases your paycheck to you. Obviously, losing some of your income when you already struggle to balance your budget can be a major hardship.
How much of your income could you potentially lose to wage garnishment?
Creditors could take up to 25% of your paycheck
Wage garnishment could lead to real financial hardship, especially for those already living paycheck-to-paycheck. Tennessee law establishes a maximum amount that creditors can request. Typically, they can ask for no more than 25% of your disposable income.
Your disposable income is whatever you earn beyond a specific threshold. Currently, in Tennessee, anything you earn that is more than 30 times the hourly rate paid for minimum wage per week is potentially subject to garnishment. Those who make minimum wage or who do not work full-time at their positions have less to lose than higher-paid workers who put in full-time work.
Can you stop wage garnishment?
Bankruptcy can help those who are already subject to wage garnishment. However, it is most useful for those who have not yet had their earnings reduced by a creditor claim. Tennessee adults facing creditor lawsuits can file for bankruptcy before they go to court. The automatic stay granted the day that someone initially files for bankruptcy will result in the temporary dismissal of any pending creditor lawsuits.
In other words, you can effectively prevent wage garnishment by filing for bankruptcy before a court hearing requested by a creditor. Those who take assertive steps will be in a better position to bounce back financially after filing for personal bankruptcy. Learning more about how personal bankruptcy helps those facing aggressive collection efforts can help you decide if it is time to file.