Wage Garnishment Laws in Pennsylvania
Creditors have multiple tools to enforce a debt – especially once they have received a court judgment. One tactic employed is a “wage garnishment,” which grants a creditor the ability to reach into your paycheck before you receive any wages. When your expected monthly income is reduced due to a court-ordered judgment, you can easily find yourself short on funds to pay for groceries, utility bills, and other essential services. Fortunately, there are methods to terminate a wage garnishment and filing for bankruptcy is one of the most cost-effective and faster ones.
The Philadelphia bankruptcy attorneys at Young, Marr, Mallis & Associates can help if you are struggling financially. We partner with our clients to work towards manageable solutions to their financial situations. Call (609) 755-3115 in New Jersey or (215) 701-6519 in Pennsylvania to schedule your free consultation.
Garnishment Restrictions in Pennsylvania
There are federal regulations that are in place to protect consumers from unreasonable financial losses. Pennsylvania further limits circumstances where wage garnishments are permitted. Only the following debts subject you to a potential wage garnishment in Pennsylvania.
- owed alimony or child support payments
- owed rent on a residential lease
- fines and fees owed as restitution for a crime
- owed student loans
- owed income or state taxes
Additionally, Pennsylvania imposed specific limits on the amount of money that could be garnished. The actual percentage that is allowed to be deducted from your salary depends upon two factors, your total monthly income and the underlying debt.
If the garnishment is to satisfy a judgment for back rent on a residential lease, it is limited to 10% of a debtor’s net wages. However, this amount is limited further if the garnishment would cause a debtor’s salary to drop below the federal poverty guidelines. Additionally, a wage garnishment is not permitted if the debtor’s income is below the federal poverty limit.
Garnishment for unpaid child support is not as restricted. Under Pennsylvania law, up to 50% of an individual’s earnings could be withheld for child support if they are also currently supporting a child or spouse who is not subject to a court order. If they are not supporting an additional spouse or a child, up to 60% of their wages could be garnished. Additionally, if the payments are over 12 weeks in arrears, another 12% could be withheld.
The U.S. Department of Education, or another authorized agency, could use an administrative garnishment to withhold wages without an order from the court. They are limited to 15% of a debtor’s disposable income and not more than 30 times the federal minimum wage.
Pennsylvania Residents That Work in New Jersey or Another State
Philadelphia and many of the surrounding counties border New Jersey, allowing people to live in one state and work in the other. It is not uncommon for a Philadelphia resident to be employed across the Delaware River. Likewise, many Pennsylvania residents commute to New York or Delaware for their job.
If you work in a different state and a judgment is entered in a jurisdiction other than Pennsylvania, your wages are subject to garnishment under the laws of the state where you are employed. If your out of state wages are being garnished, you should contact our Pennsylvania bankruptcy attorney immediately.
Other Actions Creditors Can Take in Pennsylvania
While Pennsylvania limits wage garnishments for credit card debts, medical bills, and similar debts, creditors are not without legal remedies in the commonwealth.
Judgments on Real Property
When a creditor in Pennsylvania is awarded a judgment, it automatically becomes a lien on your real property. The original judgment only extends to the county where the judgment was issued, but it can be transferred to any county where you own property. A judgment lien will stay with your property until it is satisfied or released. The debt will continue to accrue interest. A judgment lien will be a problem when you try to sell or refinance your property.
Pennsylvania does offer protection to spouses. If the property is deeded to a husband and wife as “tenants in the entirety,” and the debt is only in the name of one spouse, a judgment lien is not created. This protection extends to any joint property, including a joint bank account. It is important to note that a couple can only take advantage of this protection if they remain married. If a couple divorces, a judgment lien can be placed on the property.
Liens on Bank Accounts
If a creditor obtains a collection judgment against you, it is entitled to request a writ of execution from the court to levy your bank account. The creditor is not required to notify you that this action is being taken. Your bank will freeze your account when it is served the writ, and you will have to file a response if you want to protect your funds. However, there are only a few exemptions available, such as income from social security or joint property of a married couple. If there are no exemptions available, you are only entitled to keep $300. It is important to note that once your wages are in your bank account, they no longer receive any protection under Pennsylvania law. Therefore, if your salary is directly deposited into a bank account, it could be frozen and turned over to a creditor.
Levy Your Personal Property
A judgment creditor in Pennsylvania is permitted to levy your personal property, such as the contents of your home or your vehicle. Levies on personal property are not as common as on a bank account, especially as the value of your personal property might not warrant the expense of collecting and selling. However, a creditor will sometimes use a levy on personal items to force a settlement payment.
Judgment liens on vehicles are also exceedingly rare because of the depreciated value and the existence of another, superior lien.
Bankruptcy in Pennsylvania and Wage Garnishments
Wage garnishments could cripple your ability to pay your regular expenses, including grocery bills, utility charges, and other necessary living costs. Fortunately, there are ways to stop the deductions due to a wage garnishment. If you are eligible, filing for bankruptcy will halt the deduction from your salary. Whether you file Chapter 7 or Chapter 13, a court injunction known as the “automatic stay” goes into effect that stops all collection actions against you – including wage garnishments. This could allow you the much needed time and money to properly address your debt.
The long-term effectiveness of the bankruptcy depends on the type you file. Chapter 7 is typically a short proceeding designed to eliminate a substantial portion, if not all, of an individual’s unsecured debt. Unfortunately, wage garnishments in Pennsylvania are permitted for debt that is typically categorized as “non-dischargeable.” This means that the debt will survive the bankruptcy and the wage garnishment is likely to go back into effect once the bankruptcy is closed. In some situations, the creditor could file a motion for relief from the automatic stay – basically asking the court to allow the wage garnishment to continue during the pending bankruptcy. Depending on your specific situation, filing for Chapter 7 could only be a temporary reprieve from the garnishment. If you reside in Pennsylvania and are working in another state, Chapter 7 could eliminate the wage garnishment completely if the judgment is for a dischargeable consumer debt. The Pennsylvania bankruptcy attorneys at Young, Marr, Mallis & Associates will thoroughly review the facts surrounding your situation to help determine if Chapter 7 would be beneficial.
Debt is handled substantially differently in a Chapter 13 bankruptcy. Chapter 13 is a reorganization or restructuring of a debtor’s financial obligations. One of the significant differences between the two types of bankruptcies is that a Chapter 13 debtor is required to file a bankruptcy plan. This reorganization plan will propose a detailed course of monthly payments to address specific creditors and types of debt. Furthermore, a Chapter 13 proceeding lasts longer than a Chapter 7 bankruptcy – three to five years as compared to five to six months.
Therefore Chapter 13 offers two significant advantages. First is a much longer reprieve from the wage garnishment. Secondly, bankruptcy provides a mechanism to underlying debt that triggered the wage garnishment through the bankruptcy plan. A debtor could propose a plan that pays all or a substantial part of the debt subject to the garnishment. If this is the case, then once completing the bankruptcy, the wage garnishment might not be required.
As stated above, many of the debts that can be collected through a wage garnishment in Pennsylvania are categorized as non-dischargeable. The benefit of filing Chapter 13 is two-fold. First, the bankruptcy will force the creditor to take a five-year payment plan. This monthly payment might be significantly less than the deduction from your salary. The second does depend on your situation. Many debtors owe other financial obligations that strain an already limited budget. If those debts are eliminated through the bankruptcy, then the payment towards the non-dischargeable debt could be less of a burden. Our experienced Pennsylvania bankruptcy attorneys will work with you to draft a plan that satisfies all provisions of the Bankruptcy Code and provides relief from the wage garnishments.
Pennsylvania Bankruptcy and Frozen Bank Accounts
If your bank account was frozen, filing for Chapter 7 or Chapter 13 will give you access to your funds. Because this remedy is available to creditors for debts such as credit card and medical bills, Chapter 7 could eliminate the levy. If you did not qualify for Chapter 7, you could address the judgment lien through your Chapter 13 bankruptcy plan. In many cases, you might not be required to pay the full amount due under the judgment. Our Pennsylvania bankruptcy attorney will work with you and your financial institutions to obtain access to your funds. However, do not hesitate to contact our office or file for bankruptcy. Your bank will only keep your funds frozen for a period of 30 to 60 days and then the funds will be turned over to your creditor.
While bankruptcy will stop all collection actions against you, it does not automatically unfreeze a bank account. Proof of the filing must be provided to the bank and the sheriff you processed the court order. Additionally, the creditor or their attorney should be notified of the bankruptcy filing. Furthermore, once the funds are unfrozen, they become part of the bankruptcy estate, so they should be exempted, if possible.
Bankruptcy and Judgment Liens Against Pennsylvania Real Estate
As stated above, one of the most powerful tools a creditor has in Pennsylvania is obtaining a judgment lien against your real property or your home. This judgment lien will remain attached to your property until you satisfy the debt or the creditor releases it. Additionally, the debt will continue to accrue interest.
By filing for bankruptcy, either Chapter 7 or Chapter 13, you could have a judgment avoided, or removed from your real property. However, because the debt is now secured, it is not eligible for discharge. Our Pennsylvania bankruptcy must file a motion with the court to avoid the lien.
Avoiding a judgment lien is not available in every case. The ability to successfully remove a judgment lien on your home or other real property rests on the equity in your home and your homestead exemption. The federal exemption is $25,150. You can only avoid a lien if it impedes your exemption. This means that if the judgment lien is added to the current mortgage balance, it would reach your exemption. For example, if your home was worth $225,000 and you had a $215,000 mortgage, your exemption would cover the $10,000 of equity in the house. Therefore, the lien could not attach to your home without affecting your exemption. In this case, the judgment lien could be avoided. It is critical to review any judgment liens on your property with our Pennsylvania bankruptcy attorney.
Call Our Pennsylvania Bankruptcy Attorney for a Free Consultation
Overwhelming debt leads to economic stress. When that stress is coupled with a crippling wage garnishment, it could seem impossible to financially provide for yourself and your family. Bankruptcy offers a means to relieve that burden. If you are contemplating filing for bankruptcy, do not allow the many myths and misconceptions surround bankruptcy to dissuade you. It is crucial to speak with one of our seasoned bankruptcy attorneys to understand the benefits and drawbacks of the process. If you are considering filing for bankruptcy or if your income has been reduced due to a wage garnishment, call our Bucks County bankruptcy attorneys. At Young, Marr, Mallis & Associates, we have been assisting Pennsylvania residents through their difficult financial struggles for over two decades. Contact us today at (215) 701-6519 to schedule a free, confidential consultation to discuss your first steps to financial freedom.