Stop Collections Calls And Wage Garnishment
At Peter Scribner, Esq., I can help you deal with this and provide you with knowledgable guidance for all collection issues and wage garnishment.
How A Creditor Garnishes Your Wages
In New York State, a creditor who has sued you and taken a judgment against you can seize, or garnish, 10% of your gross wages. The creditor has a wage garnishment document, called an “income execution” sent by the local county sheriff’s office to you and to your employer.
You have twenty days to voluntarily turn over 10% of your gross wages. After that, your employer is required to start these deductions and turn the money over to the sheriff. The sheriff deducts a small fee and turns the rest over to the creditor’s attorney.
There are some limitations to the amount that can be garnished from wages. Part-time wages may be so low that none, or only a portion less than 10% can be seized. Federal law also caps state wage garnishment amounts, especially in cases where the debtor is paying significant child support. If more than one garnishment is sent to your employer, they are paid one at a time, so only a maximum of 10% can be garnished under New York law.
If the wage garnishment is sent to your current employer, you cannot stop the garnishment without filing a bankruptcy. You can call the creditor and attempt to negotiate a settlement, but a judgment creditor who is currently garnishing wages is unlikely to accept a settlement where they will receive less money than they are getting from the garnishment.
Once a bankruptcy is filed, the sheriff is notified and no further money is sent to the creditor. The garnishment itself will continue until the creditor has the sheriff send a notice to the employer terminating the execution, and the creditor must do that as soon as they are informed of the bankruptcy filing. Any money collected by the sheriff after the bankruptcy is filed must be returned to you.
Occasionally debtors receive a different type of garnishment if they owe money to the federal government. These are administrative garnishments where the government does not have to get a court judgment; they can simply order the employer to turn over 15% of the debtor’s gross income, after certain deductions. I have not seen these federal administrative garnishments very often in our area, but they do happen sometimes. Bankruptcy can stop these as well.
And sometimes income other than wages can be reduced due to a debt owed to the state government. For example, if New York State believes you were overpaid for unemployment insurance in the past, they may reduce unemployment payments in the future. These reductions in benefits may often be stopped by a bankruptcy filing as well.
How Creditors Freeze Your Account Without Your Knowledge
After a creditor gets a judgment against you, sometimes the creditor attempts to “restrain,” or freeze, your bank account. However, both Federal and New York law protects a certain amount from a bank account restraint. For example, if social security or other ‘exempt’ benefits are being automatically deposited into your bank account, the first $2,850 in the account cannot be restrained (that figure from 2018 is adjusted for inflation every three years).
Even if you do not have exempt benefits being automatically deposited into your bank account, a certain minimum amount in a personal account is ‘exempt’ and cannot be garnished. That protected exempt amount varies as the state minimum wage changes, but it is roughly two thousand dollars. If the balance in the account is below the minimum exempt amount the restraint is void and nothing happens, even if more money is deposited afterward.
Judgment creditors also are not allowed to attempt frequent restraints, so we most often see bank account restraints in February, when tax refunds are being deposited. The creditor hopes to get lucky and freeze a bank balance above the exempt minimum after a big refund is deposited but before the money is withdrawn.
If the account is restrained because it has more than the minimum exempt balance in it, you will receive a notice from the bank and a form asking if any of the money in your account is exempt from being frozen or seized by a judgment creditor. Money that is deposited into the account after the restraint is in effect — such as automatic payroll deposits — will also be frozen.
Once a creditor finds out that it has been successful in restraining your bank account, it may then have a sheriff serve a “property execution” on your bank. When that happens, the money actually goes away from your bank and is applied to the judgment. As a legal matter, a creditor is not entitled to take certain exempt funds, such as Social Security or 90% of payroll money. As a practical matter, a restraint that actually freezes funds above the exempt minimum completely messes up your bank account, even if the money in your account is not supposed to be taken by a judgment creditor.
If a bank has actually restrained or frozen any money in your bank account, please call me to discuss your options. You may be able to contest the restraint by filling out the exemption claim form the bank sends you, but you have a very limited period of time — twenty days from the date on the form — to send that in. And if a bankruptcy filing is necessary, the restraint is lifted and the frozen funds usually returned to your control.
Call Me Today At 585-643-7109 To Stop Creditor Harassment Tomorrow
As soon as you retain me to file for Chapter 7 or Chapter 13 bankruptcy, by law, the collectors must deal directly with my office. That means that you can put a stop to the harassing phone calls at home and work – tomorrow.
Contact me today for a free consultation about your debt relief needs. I will clearly explain the laws about how bank account restraints and wage garnishment work and how to make Fair Debt Collection Practices Act violations stop.