Comparing Garnishments and Voluntary Wage Assignments

For as long as I’ve practiced consumer bankruptcy law, a common issue that has confused my clients is the difference between court-ordered garnishments and voluntary wage assignments. Garnishments and wage assignments are both methods of creditor collection where monies owed are taken directly out of a person’s paycheck. The pivotal difference between the two is that one is mandatory while the other is voluntary.

Garnishments: If your employer, payroll department, or human resources department receives a court-ordered (and usually court-stamped) notice of wage deduction, this means that a collection judgment has been entered against you and the creditor who sued you is exercising their legal right to collect the money owed to them via your paycheck. Your employer must comply with this court-order, or they themselves can be held in contempt of court and subject to fines, etc. Depending on the jurisdiction on which you live and pursuant to any instructions on the order, your employer much start the garnishment coming out of your check typically within two to four weeks after receiving the order. Being mandatory, the only way to stop a pending garnishment in most cases is either by filing Chapter 7 or Chapter 13bankruptcy, or by paying the creditor off in full via a lump sum payment.

Voluntary Wage Assignments: A voluntary wage assignment is a contract that a person signs at the time they apply for a loan or credit. These are typically used by creditors to assure that they have a way to collect on a borrower (often with less-than-perfect credit) should that person default on the loan or credit they’ve extended to them. The contract states that if the borrower should not make their payments to the creditor timely, the borrower gives the creditor the right to submit the voluntary wage assignment to their payroll for collection. (Payday Loan places, jewelery and furniture stores that extend people credit directly are the creditors that use wage assignments the most often from my experience.) While filing a bankruptcy is the only way to stop a court-ordered garnishment, a written revocation is all that’s necessary to stop a voluntary wage assignment. A simple letter from you or your bankruptcy attorney notifying your employer and the creditor who issued the wage assignment is all that’s needed to prevent or stop any further funds from coming out of your paycheck.

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