Friday, March 20, 2009

Knowing More About Wage Garnishments, IRS Levies and Legal Holds

Sometimes, people owe debts such as IRS back taxes, federal or local state taxes, back child support or even alimony from a spouse. In this scenario, the creditor obtains a court order to attach a portion of their wages to satisfy that debt. This is what we call garnishment and it varies from state to state and from situation to situation.

Neverthless, this is done as a last resort. In many cases, other means of contacting the individual and resolving the issue have been attempted and been found fruitless. This is then where the creditor, faced with no other alternative, approaches the courts for help. The courts then determine that the defendant is unwilling to voluntarily settle the debt and thus is subject to a court order to garnish their wages.

There are many other occasions that may necessitate this. One is delinquent student loans which is more common than people care to imagine. Garnishment is as traumatizing as it is embarrassing and can wreak havoc especially in tough economic times like these.

The good news is that the law that governs garnishments also protects the debtor in many ways. This is because of the assumption that the creditor has a tendency to harass the debtor or to take more than is fair. That is why the Consumer Protection Act puts a stipulation that one's wages cannot be garnished beyond a certain percentage. The court also requests the debtor to fill out an income and expenditure assessment form which tells the court exactly how much to garnish. In most cases, no more than 25% of one's disposable income may be garnished unless it is in cases of bankruptcy.

It is also recommended that the debtor make an honest attempt to contact the creditor and try and work something out that does not involve the courts. This is an excellent way to avoid wage garnishment.

Fighting wage garnishments
Sometimes, the debtor may be able to fight off garnishment or legal holds in certain circumstances:

1. If he (debtor) can provide documentation showing that he or she has already settled the debt in full.
2. If the debtor can prove that there is already an agreement in place to pay the debt and the debtor has not defaulted on the agreement.
3. The amount of the debt is wrong.
4. The debt has already been discharged in a bankruptcy hearing.

Then there are also times when it is impossible to collect. These are:

1. When the entity owed is no longer in business or has ceased operations.
2. The death or permanent disability of the defendant or in this case the debtor.

As we have mentioned earlier, wage garnishments are only used when all other options have been exhausted. The creditor may have tried to contact the debtor to work out an agreement where he (debtor) can voluntarily pay the debt but may have failed to gain such an agreement. The creditor then turns to the courts.

The credior must also prove that he or she has previous been unable to recover the debt using a voluntary agreement between him (or her) and the debtor

Irene James is a consultant who speciallizes in court orders and she recommends what to do in case you are subject to IRS garnishments or court levies

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