Wage Garnishment in Indiana

Is a creditor garnishing your wages? In Indiana, if you owe money to a creditor, like a credit card company, they can take money directly out of your paycheck to collect the overdue debt. This process is called wage garnishment, and it’s often used when borrowers stop making payments on their loans or credit card debt. Having your wages garnished can make it difficult to pay your other bills like your mortgage or rent.

If a creditor wants to garnish your wages in the Hoosier State, they need to follow a strict legal process. Federal and state laws also limit how much they can take. Knowing how the garnishment process works, including what rules creditors must follow, can help you protect your rights in the process.

What Is Wage Garnishment?

Wage garnishment is a form of debt collection. When creditors garnish your wages, they take money directly from your paycheck before your employer pays you. A wage garnishment will show up on your paycheck as a deduction, much like deductions for benefits or income taxes. 

Creditors can usually only garnish your wages if they have a money judgment against you. Once they have a judgment, they can ask the court to establish a wage garnishment as a way to get their money back. Aside from needing a judgment, creditors also need to follow certain rules about how much money they can take and what kinds of income are exempt from garnishment. 

Who Can Garnish My Wages in Indiana?

In Indiana, original creditors, debt collectors, and debt buyers can all get a wage garnishment against you as long as they have a valid judgment for the money owed. Although the general rule is that wage garnishments can only be started if the creditor has a judgment, there are some exceptions. Some types of creditors don’t need a judgment to garnish wages for special kinds of debts. These creditors include the Internal Revenue Service (IRS), federal student loan servicers, and parents who are owed child support.

The IRS can garnish your wages to pay back taxes without a judgment. To do this, the IRS uses a wage levy and then garnishes a certain amount based on your income and number of dependents.  

Federal student loan servicers can garnish your wages if you default on a federal student loan. This is not like private student loan servicers, which do need a judgment to garnish your wages. 

Lastly, if you owe child support, the other parent of the child can request a wage garnishment from the court without getting a separate judgment. In Indiana, a parent can garnish up 50% of your disposable wages in a given week or 60% if you don’t have another dependent child or spouse to support.

These special types of debts also have separate rules and procedures. But in this article, we’ll focus on wage garnishment for non-special debts that can only happen after a judgment.

Indiana Wage Garnishment Process 

Wage garnishment laws vary by state. To get a wage garnishment in the state of Indiana, a creditor first needs to sue you in court for the debt you owe. If you don’t show up to the court to challenge the creditor’s lawsuit, then the court will issue a default judgment against you. In either case, the creditor can use this judgment to initiate the wage garnishment process.

After the creditor has obtained a judgment, they will then request a hearing called a proceeding supplemental. This is a hearing that helps the creditor get the information they need to start the wage garnishment, including your place of employment and current income. They must notify you of this hearing so that you know when and where it is. At the proceeding supplemental, you will need to answer questions about your income so that the court can determine whether wage garnishment is possible and how much can be garnished. 

You, your banks, or your employer may also be sent interrogatories, which are questions that will help the creditor understand what your current income and assets are. Once the creditor has the information they need from you and any other third parties (like your employer), they will ask the court for a court order for the wage garnishment. The court then needs to calculate how much can be garnished from you. 

Reducing the Garnishment Amount

If the wage garnishment amount that the court has calculated is too high, you can ask the court to reduce the amount listed in the withholding order. To do this, you must show good cause for requesting the reduction. Generally, a good cause means a good reason for asking the court to do something. In the case of reducing a garnishment, a good cause reason may be that the garnishment is preventing you from paying necessary bills or purchasing enough food for your children. 

How Much of My Paycheck Can Be Taken by Wage Garnishment?

Both federal and Indiana law limit the amount of money a creditor can garnish. Creditors can only take the total amount awarded in the judgment against you. They can also recover fees, costs, and interest that builds during the debt collection process. Generally, Indiana follows federal law limits on wage garnishments. Under Indiana and federal law, after obtaining a wage garnishment order, a creditor can garnish the lesser of the following on a per paycheck basis:  

• 25% of your disposable earnings for that week, or  

• The amount by which your disposable earnings for that week exceed 30 times the federal minimum wage, which is currently $7.25.

If you ask for a reduction and can show good cause, the court may order the garnishment amount to be reduced from 25% to a minimum of 10% of your disposable earnings. Under Indiana law, disposable earnings means your earnings or income minus any deductions that are legally required to be withheld, such as payroll taxes or Social Security. This is sometimes called disposable income.

Creditors cannot garnish exempt income, such as Social Security benefits, veteran’s benefits, unemployment compensation, and workers’ compensation. In Indiana, there are various other kinds of exemptions that protect certain assets from garnishment.

How To Stop a Garnishment in Indiana

In Indiana, there are two ways to stop a garnishment. You can either pay the full amount owed according to the money judgment against you, or you can file for bankruptcy. In some cases, you can negotiate a repayment plan with the creditor.

If you decide to pay the full amount, you can either pay the creditor back using a lump sum, or you can let the garnishment continue until the full amount is paid off. Generally, you’ll pay less if you’re able to offer a lump sum because you won’t have to pay fees or interest.

Your second option in Indiana is to file for either Chapter 7 or Chapter 13 bankruptcy. Bankruptcy is a common debt relief strategy. Although both types of bankruptcy have their advantages and disadvantages, only certain individuals qualify for Chapter 7 bankruptcy. You can file Chapter 7 bankruptcy without a lawyer by using Upsolve’s free web tool. If your case is more complicated or you want legal help, you can also get a free consultation with a bankruptcy attorney.

Are There Any Resources for People Facing Wage Garnishment in Indiana?

If you’d like legal assistance with your debt, Indiana has several resources available, including: 

• Indiana Legal Services (ILS) – ILS is a legal aid organization that provides legal representation to qualifying individuals. To see if you qualify, you can apply for legal help using their online screener.

• Indianapolis Legal Aid Society (ILAS) – The ILAS is a legal aid law office that provides legal advice and representation to individuals in Indianapolis and the surrounding areas.

• Indiana Legal Help – You can also find legal resources through Indiana Legal Help, which is a website that provides access to legal assistance by county.

• Self-Service Legal Center – You can find additional resources on the Indiana court system’s self-service legal center page.