October 19, 2021
Summary: Are you being sued by a debt collector for an old debt? Worried they'll take your private disability payments? Find out if private disability payments can be garnished and what to do about it.
Federal laws protect different types of wages from garnishment. In most cases, disability payments are exempt from wage garnishment; however, different states have different regulations. Some states may allow a creditor to garnish private disability payments. Nevertheless, federal law protects part, if not all, of your private disability payments from garnishment.
First things first, you'll need to learn some basic facts about garnishment to understand the type of protected wages. Here's everything you need to know.
A wage garnishment is permission granted to a creditor to directly collect unpaid amounts of debt from the debtor's wages. When the creditor wins a case against the debtor, the court grants them a writ of garnishment. However, the law limits the amount creditors can collect and the type of wage subject to garnishment.
Wage garnishment exemptions allow the debtor to keep some money for their necessities despite the debt collection permission granted to a creditor. Different states list different types of exemptions, most of which include the following types of wages:
Depending on the different state laws, these wages may be partially or fully protected from garnishment.
Many businesses provide insurance for their employees against getting injured or disabled while at work via a third-party insurance company. Similarly, some individuals buy personal insurance to cover them in case of an injury, especially if their profession is high risk. This is called private disability insurance and is classified as a needs-based, high-priority wage type in the United States. As a result, in most cases, these kinds of payments are protected from wage garnishment.
However, there is an exception to private disability insurance garnishment. The court may allow a creditor to garnish these funds if the debts are a higher priority than the disability funds. For example, child support and government taxes can be collected from these funds.
On the other hand, disability payments paid by the state are generally protected from garnishment. The simple rule is that the state can't collect from the money it provides for its citizens for support. State disability payments are more protected than private ones. However, if the court deems a debt to be of a higher priority, such as child support, your state disability payments may be garnished.
A creditor can be allowed to collect money from your employer or your bank accounts. The money is collected from your bank account through levies, which is similar to garnishment. In this case, the bank diverts money from your account to the creditor as per the terms of the debt collection. If the bank is not aware of the source of funds or the money commingled with other funds in your account, money in the bank will be treated simply as cash in the debtor's account.
This means that if you deposit part or all of your disability payments to your bank account, the money loses its protection from garnishment and simply becomes cash. However, your disability payment remains protected if it is still unpaid by the insurer or is in the form of a check.
But that does not mean that you should not deposit your money in the bank in fear of garnishment. On the contrary, all you need to do is inform the bank of the source of funds to prevent them from imposing levies according to the law.
Generally, the federal Consumer Credit Protection Act protects 25% of your disposable earnings from debt collectors. However, this amount may be too little for you to live on if your earnings are subject to garnishment.
You may have a chance to adjust the garnishable amount by filing an objection. However, your chances of changing the percentage of garnishable income depend on the state you are in and the type of debt being collected.
Before a garnishment notice is issued to your employer, you usually have a chance for a hearing or a written notice on the cause of action. After receiving this notice, you will have a few days to respond if you have any objections before the garnishment process begins. In most cases, it could take a couple of business days or up to 30 days.
You should indicate your genuine reasons for objection in your response and provide any evidence that supports your claim. If accepted, the garnishable amount may be reduced, or the garnishment order suspended altogether.
The best way to prevent your case from ending up in a garnishment order is by tactfully filing your Answer for a debt collection lawsuit. Solosuit can help you discover several legal ways to approach the debt lawsuit Answer and challenge the creditor in court effectively.
SoloSuit makes it easy to respond to a debt collection lawsuit.
How it works: SoloSuit is a step-by-step web-app that asks you all the necessary questions to complete your answer. Upon completion, you can either print the completed forms and mail in the hard copies to the courts or you can pay SoloSuit to file it for you and to have an attorney review the document.
"First time getting sued by a debt collector and I was searching all over YouTube and ran across SoloSuit, so I decided to buy their services with their attorney reviewed documentation which cost extra but it was well worth it! SoloSuit sent the documentation to the parties and to the court which saved me time from having to go to court and in a few weeks the case got dismissed!" – James
Here's a list of guides for other states.
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