When your debt goes unpaid for an extended period of time, creditors begin to take severe action to get their money from you. Depending on the nature of your debt, creditors may initiate foreclosure, repossession, bank levies or wage garnishment. Foreclosure and repossession are reserved for secured debt, meaning creditors can take back the property you secured against your loan. A bank levy, also referred to as non-wage garnishment, occurs when your bank account is frozen due to a creditor seeking payment from you. This and wage garnishment are common tactics used to collect on unsecured debt, such as credit card debt.
In Minnesota, all of the above mentioned collection actions require a lawsuit or legal judgment to be pursued by your creditors in most scenarios. There are exceptions to this rule. In the case of wage garnishment, legal action isn’t required for your creditors to begin garnishing your wages to collect unpaid income taxes, court ordered child support, child support arrears and defaulted student loans.
If you are unable to make payments on your debt and you have a source of income, creditors will begin taking money directly from your source of payment. The court will issue a wage garnishment order that will be sent directly to your employer, instructing them to withhold a specified amount of your payment and send it to your creditors.
Minnesota Wage Garnishment Regulations
As a consumer you are protected, by federal law, from having all of your income withheld. In Minnesota there are even stricter laws that limit garnishment amounts. Creditors can garnish up to 25% of your disposable income (income left after employer makes deductions required by law) or the amount by which your weekly disposable earnings exceed 40 times the federal hourly minimum wage. These laws are in place to attempt to leave you with enough money to support yourself and your family.
Federal law also protects you from job termination. If you have one garnishment order your employer cannot legally dismiss you due to the garnishment. However, if you have more than one wage garnishment order the law no longer protects you from losing your job.
Stop Wage Garnishment
Both bankruptcies immediately stop all creditor actions through what is referred to as an “automatic stay.” The Official Website of the Office of the Minnesota Attorney General explains the automatic stay as follows:
- […] the automatic stay can buy you a few days or weeks in which to figure out your next move. If your primary motivation in filing bankruptcy is to gain the benefits of the automatic stay, you don't need to file all of your papers at once. You just need to file the two-page petition and a listing of your creditors. You have 15 days in which to file the rest of your papers. If you don't, your case will be dismissed
- Once you file, a creditor cannot take further action against you unless the creditor has permission from the bankruptcy court. The creditor will ask the bankruptcy court to remove (or "lift") the automatic stay if it is not serving its intended purpose.
If your wages aren’t being garnished yet, try to talk to your creditors and work out a repayment plan that is manageable for you. If they will not cooperate or listen to your requests, it is time to seek professional help and begin to research your options. A bankruptcy attorney can assist in guiding you toward the right option for your specific financial predicament. Our Debt Solutions 101 eBook can introduce you to your options and begin to clarify for you, which debt solutions work best in varying circumstances