Dallas Wage Garnishment Relief Attorneys
Helping Texans Fight and Avoid Wage Garnishment
The state of Texas offers a great deal of restrictions and regulations governing when creditors can garnish your wages – that is, removing money from your paycheck to settle a debt. Fortunately, these laws heavily favor and protect the borrower. In fact, Texas prohibits banks, utility companies, and credit card companies from garnishing wages to collect on most types of debts.
There are some exceptions to Texas’s broad “no wage garnishment” rule. The types of debt that can result in wage garnishment can be counted on one hand, however, and there are stringent limits on how much can be taken and when. Still, wage garnishment only occurs when you owe money, money you are most likely unable to immediately repay in the first place. Experiencing wage garnishment of any kind can be disastrous for your day-to-day life and should be avoided whenever possible.
Our Dallas wage garnishment relief lawyers can work to protect you from the worst consequences of wage garnishment and explore options to help you get to a more optimal financial position. Our team has more than 40 years of combined legal experience and a full knowledge of when and how garnishment is permitted in Texas as well as the means to defend yourself against it.
What Is Wage Garnishment and How Does It Happen?
Wage garnishment, or “garnishing your wages,” refers to money being directly and involuntarily removed from your paycheck. Your employer is obligated to facilitate the transaction as the result of a court order mandating the garnishment. The withdrawn funds are sent directly to one or more of your creditors to partially repay the debt.
Broadly, wage garnishment only happens when there are one or more severe delinquencies on your debts. States have differing rules governing wage garnishment, but you do not need to fear a scenario where you lose the entirety or even majority of your paycheck to creditors. There are practically always strict limits on how much garnishment can remove from a paycheck. You will also generally get plenty of notice on when a creditor is planning to pursue wage garnishment, giving you time to prepare.
How Does Wage Garnishment Work in Texas?
The good news is, more often than not, creditors are legally barred from pursuing wage garnishment from you in Texas. There are specific exceptions, which we will discuss more below, but it is worth pointing out that some unscrupulous creditors or collection agencies may attempt to threaten you with garnishment. These bad actors will sometimes assume borrowers do not understand their rights under the law and will use the threat of garnishment to intimidate you into paying up.
Many common types of debt cannot lead to wage garnishment in Texas, including:
- Credit card debt
- Medical debt
- Personal loans
- Utility bills
- Late payments on your mortgage or rent
- Late payments on your vehicle
- Late repayments on a loan from a bank
If your debt is rooted in these categories, you are likely protected from wage garnishment. However, this does not mean you should not do anything about your debt. Not addressing debt results it in accumulating through late fee penalties and interest and will eventually result in even more significant consequences. Continued failure to pay your mortgage will likely trigger foreclosure, failure to pay rent leads to eviction, and not making payments on your vehicle results in repossession.
In addition, creditors can be frustratingly savvy about how workarounds to Texas’s wage garnishment laws. If they cannot garnish your wages, they may instead move to seize other assets, including funds from bank accounts.
You should also be careful if you work for a company that is based outside of Texas, as creditors may be able to procure a court order to garnish your wages through a domestication of judgment.
Will My Employer Fire Me If They Receive a Wage Garnishment Order?
While an employer receiving a wage garnishment court order can no doubt be embarrassing, you have legal protections from retaliatory consequences as it relates to your job. Employers may balk at the prospect of having to facilitate the garnishment, but they are legally obligated to complete the task. Texas state and federal law both protect the impacted employee in this scenario. Your employer cannot fire, discipline, or demote you should they receive a wage garnishment order. They also cannot refuse to hire someone on the basis of past wage garnishment orders or the receiving of one during the hiring process.
What Types of Debt Can Result in Wage Garnishment in Texas?
There are several exceptions to the “no wage garnishment” rule in the state of Texas, all of which involve the United States government. This is an important distinction, as the U.S. government does not typically require procuring a court order to initiate the wage garnishment.
Types of debt that can lead to wage garnishment in Texas include:
- Unpaid court-ordered child support or alimony
- Unpaid income taxes
- Defaulted federal student loans
Each category of exempted debt carries its own conditions and restrictions on when and how much of your paycheck can be garnished. Defending against each also requires a different strategy. Our Dallas wage garnishment relief attorneys can evaluate your debt situation, determine your vulnerability to wage garnishment, and work with you to develop a plan to chart a course for a debt-free future.
Unpaid Child Support and Alimony
It is important to prioritize timely child support payments, as your divorced spouse is entitled to a great array of legal powers should you fall behind. If your divorce occurred after 1988, all court orders mandating child support also include an authorization for wage garnishments should payments not be made.
When you fall behind on child support and your partner refuses to cooperate or give you more time, they do not need a judgment to initiate wage garnishment. Remember, the child support order already includes a clause allowing withholding, so they only need to contact your employer.
In cases of unpaid child support or alimony, as much as 50% of your “disposable earnings” can be garnished, or up to 65% if you are not presently supporting another dependent. This is by far the least favorable garnishment rate on the books. Disposable earnings refers to your take home pay (the amount you get after all taxes are taken out) minus any medical insurance or bills for you and your children, nondiscretionary retirement deductions, and union dues, if relevant.
You have the ability to formally object to wage garnishment stemming from unpaid child support or alimony payments. A court hearing can be set shortly after the garnishment first takes effect.
Objections you can register at an unpaid child support or alimony hearing include:
- The garnishment is improper because the amount allegedly owed is incorrect
- The amount of the garnishment is leaving you too little income to reasonably live your life
- The garnishment should not apply because you had custody of the child when the unpaid support accumulated
- The garnishment should not be honored, as the spouse has actively concealed the child despite visitation rights
Each of these arguments could potentially result in the garnishment being halted and/or reversed, though it should be noted courts often do not look kindly on those who do not make child support or alimony payments. Better yet, we can work with you to solve debt problems to avoid outstanding child support payments in the first place.
You may be wondering if you can discharge unpaid child support or alimony through filing Chapter 7 bankruptcy or Chapter 13 bankruptcy. Unfortunately, unpaid court-ordered amounts are not considered an unsecured debt and cannot be discharged in a bankruptcy.
How Bankruptcy Can Help With Your Financial Situation
With that said, bankruptcy can still help you get on top of your financial situation and facilitate a resolution to unpaid child support. If you are under threat of garnishment, chances are you are not paying child support because your financial situation has made doing so impossible. Successfully completing either Chapter 7 or Chapter 13 bankruptcy typically results in your being authorized to discharge unsecured debts. This includes credit card bills, medical bills, overdue utility bills, and personal loans. Offloading this debt will likely give you the financial flexibility to catch up on child support payments.
It is worth noting that the automatic stay, a court order that freezes collection actions, does not apply to unpaid child support. Filing for bankruptcy will not prevent your divorced spouse from pursuing wage garnishment. However, you may be able to convince your divorced spouse you are taking immediate steps to rectify the solution and get to a financial position where you can reliably make payments.
Unpaid Income Taxes
The Internal Revenue Service (IRS), the U.S. government agency that handles tax affairs, has the ability to garnish your wages if you owe them money in federal income taxes. The exact amount they can garnish varies depending on the deduction rate and the amount of dependents you currently support. Like with child support, wages will be garnished from your disposable earnings, not your gross paycheck.
Because they are an arm of the federal government, the IRS does not require a court order to garnish wages. However, they historically will make ample attempts to collect payment and discuss outstanding debt before resorting to punitive measures.
How To Discharge Federal Income Tax Debt
Both Chapter 7 bankruptcy and Chapter 13 bankruptcy can permit you to discharge federal income tax debt that meets certain eligibility requirements, helping you to avoid wage garnishment and other significant consequences. Only income tax that is a minimum of three years delinquent qualifies, and you must have filed all the appropriate federal tax returns on-time. The owed taxes must also not be the result of any fraud or tax evasion.
Even better, filing for any type of bankruptcy initiates the automatic stay, which halts all collection actions. Wage garnishment is considered a collection action, so the IRS will not be able to garnish wages as you go through the bankruptcy process. In the case of Chapter 13 bankruptcy, this process lasts as many as 5 years, giving you ample time to reorganize finances. Upon successful completion of a bankruptcy filing, you will usually be allowed to discharge the qualifying tax debt.
Sometimes state and local governments may also be able to garnish wages for any back taxes owed. This can vary by county and region, and our team can advise what steps you should consider.
Defaulted Federal Student Loans
When you take out student loans to attend an academic institution, you may not realize you may be taking out a combination of federal loans, guaranteed by the United States Department of Education, and private loans, guaranteed by a bank or another financial entity. Federal student loans facilitated by the Department of Education or any entity it authorizes to collect for the agency operate under special rules regarding wage garnishment.
The Department of Education or entities operating on its behalf have the ability to garnish your wages in the state of Texas should you enter default on one or more federal student loan. Because they are a government agency, they do not need a court order to do so. You will still likely receive a fair amount of notice before garnishment is pursued.
Fortunately, the Department of Education’s ability to garnish is limited relative to other exceptions. Your disposable income – not your gross paycheck – can be garnished by up to 15% for each pay cycle. This amount cannot exceed 30 times the minimum wage, or $217.50 as of 2020 in the state of Texas.
Filing for Chapter 7 or Chapter 13 bankruptcy can potentially help you combat unending student loan debt. Discharging student loan debt is not a simple endeavor and requires proving to the bankruptcy court that the debt is causing an “undue hardship.”
Proving student loan debt is causing undue hardship typically involves proving:
- You and any dependents you support cannot maintain a minimal standard of living if you are forced to repay the outstanding debt
- Your situation is not likely to fundamentally change for the foreseeable future, meaning the below-minimum standard of living will continue
- You made good faith efforts to repay the student loans
Our Dallas wage garnishment relief lawyers can help assess whether you have a case for discharging student loans through bankruptcy. Even if outright discharging the loans is unlikely, remember that filing for any type of bankruptcy institutes an automatic stay, preventing collection actions from being taken against you. Your wages will not be able to be garnished on account of defaulted student loans for the duration of your bankruptcy, giving you time to discharge other types of debt and reorganize finances.
We Can Help You Avoid Wage Garnishment
The frustrating truth about wage garnishment is it only occurs when you are already financially struggling. Wage garnishment can make a bad situation worse, limiting your ability to pay for basic necessities or even forcing you to take on even more debt. Though Texas law is geared to protect borrowers, exceptions to wage garnishment restrictions can still lead to devastating consequences.
Our team at The Law Office of Truman E. Coe, P.C. can work with you to explore how bankruptcy can raise you out of endless debt and even discharge certain types of debt that would otherwise trigger wage garnishment. We strive to give our clients the compassionate, individualized care their cases require and deserve and will leave no stone unturned in our efforts to help you defeat debt.