In Illinois, a judgment creditor can obtain a court order to put in place a wage deduction from your earnings. This is commonly referred to as garnishment. This wage deduction takes a percentage of your wages, before you ever see them, and transfers them to your creditor.
This wage deduction, or garnishment, can only be done where there is a valid judgment debt. In Illinois, the creditor then files an action in court to deduct the lesser of either 15 percent of your gross wages for a week or the amount by which disposable weekly earnings exceed 45 times the federal minimum hourly wage. Federal law also prohibits garnishment exceeding 25 percent of disposable income.
This limit was put in place to ensure that no one would have their entire earnings taken by a creditor, leaving them destitute and unable to afford their necessary life expenses, like food and rent.
Non-wage garnishment, as the name implies, is used against other financial assets, such as a checking or savings account at a bank.
Child support payments and student loan debt can be used to create a garnishment without a court order, so you may not receive the same type of legal notice you would for a typical garnishment.
Retirement benefits and social security are generally exempt from garnishment.
How To Stop Garnishment
A bankruptcy, in most cases either a Chapter 7 or a Chapter 13, can be used to stop a garnishment. Filing a bankruptcy stops all collection activities of creditors, by the creation of the automatic stay, which is put in place as soon as you file your bankruptcy petition.
In a Chapter 7, it may be possible to discharge the entire debt that gave rise to the garnishment, thereby eliminating any possibility of the garnishment being restarted after the bankruptcy is over.
In a Chapter 13, you may, if you have sufficient disposable income, pay some percentage of the underlying debt in your Chapter 13 plan. The plan is like a five-year budget that permits the repayment of some of your debt, and at its completion you receive a discharge.
Determining which chapter of the bankruptcy code will work best for your situation is a complex question and a bankruptcy attorney can review your finances and eligibility, and can help you decide.