If you live in New York and your wages are being garnished, bankruptcy may be able to help you keep your paychecks and stop wage garnishment.
Wage garnishment is a debt collection tool used by credit card companies and other judgment creditors to collect a money judgment. It works by taking a certain amount of money from your disposable earnings every pay period. Depending on your financial situation, you may be able to use bankruptcy as a way to deal with a wage garnishment in New York state.
This article will explain how wage garnishment works in New York state and how bankruptcy can be a helpful debt relief tool to deal with an ongoing wage garnishment.
What is Wage Garnishment?
Wage garnishment happens when a court issues a garnishment order requiring your employer to withhold a portion of your paycheck and to send it directly to the judgment creditor. This in turn causes your employer to take the money from your paycheck automatically, much like income taxes and social security payments come out of your paycheck automatically. So, it won’t change your gross wages but it will reduce the amount of money you’ll be able to put in your bank account on payday.
In general, your paycheck continues to be garnished until the debt is paid off in full or otherwise resolved, either through a new court order or through a bankruptcy filing. If you want to stop having your wages garnished, a Chapter 7 bankruptcy can provide the quickest form of debt relief.
How wage garnishment works in New York is decided by state and federal law. Generally speaking, New York provides more protection against wage garnishment than federal law does. That means that you may have more protection from wage garnishment in New York than if you lived in another state.
Wage Garnishment in New York
If you’re employed, a judgment creditor can garnish your wages to collect the money you owe them. First, they’ll have to file an “income execution form” and get it signed by the county clerk or the City Marshal. You may be able to challenge this action depending on your specific circumstances.
If your disposable income - your take home pay - is less than 30 times the minimum wage, New York state law doesn’t allow creditors to garnish your wages at all. Minimum wage varies by county in the Empire State.
If you’re in New York City, it’s $15/hour. As of the end of 2020, both Long Island and Westchester Counties will also have a $15/hour minimum wage. The lowest minimum wage in effect in New York State as of November 2020 is $11.80/hour.
In short, if your net pay (the amount you actually get) is less than $354 per week (or $708 if you get paid every other week), your wages can’t be garnished because they're protected by an exemption.
If you have a higher income, up to 10% of your gross income or 25% of your disposable income could be susceptible to wage garnishment in New York. The lesser of the two amounts is the limit to what can be taken out of your paycheck.
Not All Income Can Be Garnished In New York
New York law limits the amount someone’s wages can be garnished as explained above. But, if you’re not working, your income may be 100% protected from wage garnishment in New York. The types of income can’t be garnished in New York:
Social Security (including SSI)
Public Assistance (welfare)
Court-ordered alimony / spousal support
Court-ordered child support
Income from Unemployment Insurance, Disability, and Workers’ Compensation Benefits
Certain public benefits
Public and Private Pensions and retirement savings (like 401ks and IRAs)
Private Trust fund principal and 90% of any payments
90% of your salary earned in the last 60 days
If your income is from one of the exempt sources and you don’t have any valuable property (or lots of money in a bank account) that a creditor can reach, you’re judgment proof. While a creditor can still get a money judgment against you (including a default judgment), they can’t collect on it.
The Kind of Debt You Have Matters
In New York, certain types of debt can be garnished at different limits. Some kinds of debt can be garnished at higher percentages than others.
Child Support and Wage Garnishment in New York
New York state can use wage garnishment as a way to collect money owed for child support and child support arrears. Your employer can be ordered to take money out of your paycheck in order to pay this debt.
Support payments generally are garnished at a higher level than normal.
Additionally, New York follows the Uniform Interstate Family Support Act which requires employers to honor wage garnishment laws of other states. If you owe child support to someone outside of New York then state’s laws may determine how your wages can be garnished.
Tax Debt and Wage Garnishment in New York
New York state can use wage garnishment to collect unpaid taxes. New York will continue to garnish your wages until you pay your entire debt.
However, if you file for bankruptcy then New York state will stop garnishment as you go through the process. New York state might still send you statements about taxes you owe and the income tax debt may not be dischargeable, but the debt relief from eliminating all other debts can put you in a position to resume voluntary payments and get out of debt.
New York state provides a calculator that you can use to estimate how much of your wages could be garnished.
Student Loans and Wage Garnishment in New York
If you have unpaid student loan debt, New York may be able to garnish your wages. If you have defaulted on your student loans, New York can garnish up to 15% of your disposable income.
You may be able to contact your loan provider to make alternate arrangements and set up a voluntary payment plan. Keep in mind that private student loans are considered a private debt so they have to follow the rules in place for credit card debt, medical bills, and other private debt when determining the maximum amount they can garnish.
Dealing with Wage Garnishment in New York
One way to deal with wage garnishment in New York is to talk to try and work out a voluntary payment arrangement with who you owe money too. You may be able to negotiate with them to try and find another arrangement besides wage garnishment.
Bankruptcy is another way that you may be able to deal with wage garnishment. It can be especially helpful if you’re in need of debt relief and not just dealing with one creditor. When you file for bankruptcy most kinds of wage garnishments will stop.
There are many ways to file for bankruptcy including hiring an attorney or filing for bankruptcy yourself. If you need to stop a wage garnishment in New York but can’t afford to hire a lawyer for your Chapter 7 bankruptcy, check if you’re eligible to use Upsolve’s free tool instead.