Wage Garnishment in New Jersey: A Debt Collection Tool of Last Resort
Execution against wages, also known as wage garnishment, is a form of debt collection. Both state and federal laws control wage garnishment in several ways, including regulating when wages can be garnished and limiting wage garnishment to protect consumers. Compared to federal rules and surrounding states' laws, New Jersey has some of the strongest protections for people facing wage garnishment.
If a consumer acquires debt but does not pay his or her bills, the consumer's creditor, such as a credit card company, may sell the debt to a debt-collection agency. By selling the debt to a collection agency, the credit card company obtains payment from the collection agency and no longer attempts to obtain payment from the consumer. Instead, the debt-collection agency tries to obtain payment from the consumer to recover the money it paid the credit card company for the right to receive the consumer's payment.
When a credit card company, debt-collection agency or other creditor is unsuccessful in obtaining payment for a debt, the creditor may file a lawsuit against the consumer. Through the lawsuit, the creditor seeks to obtain a court order, called a judgment, in which a judge orders the consumer to pay the creditor. If the consumer loses the lawsuit or fails to respond to it, a judgment may be issued to garnish the property, bank accounts or wages of the consumer in order to satisfy the debt.
New Jersey Wage Garnishment
Wage garnishment is only permitted when a judgment has been entered by a judge allowing an "execution against wages" following a lawsuit against a consumer. In New Jersey, wage garnishment is permissible when a judgment against a consumer has been obtained in the Superior Court and when the consumer receives $48.00 or more per week in wages, earnings, salary, income from trust funds, or profits or debts due and owing to him or her.
Before a creditor may obtain an execution of wages, the creditor must serve notice upon the consumer. According to New Jersey laws, the notice must tell the consumer:
- That the creditor will apply for a court order directing a wage execution to be served on the consumer's employer
- The limitations New Jersey and federal laws place on the amount of wages that may be garnished
- That the consumer may respond in writing to the court and the creditor stating the reasons why wage garnishment should not be allowed, within 10 days of receiving the notice
- That the consumer must indicate his or her desire for a hearing on the matter, otherwise a wage-garnishment order may be entered
- That the consumer may object to the wage garnishment or apply for a reduction in the amount garnished after an order is entered by filing a written statement with the court and the creditor; a hearing will be held within seven days after the objection is filed
It is extremely important to respond to the notice because, if a consumer does not respond, a judge may order a default judgment against him or her that automatically allows the execution against wages. If a judge grants the creditor's request for an execution against wages, a percentage of the consumer's wages may be garnished from his or her paycheck and transferred to the creditor.
In New Jersey, a creditor has 20 years to act on a judgment and can garnish a consumer's wages at any time in that two-decade period. Even more, judgments may be renewed for an additional 20 years upon motion by the creditor.
After a judgment allowing execution against wages has been entered, the only recourse for a consumer is to challenge the factual basis for the original debt or to seek a reduction in the amount of wages garnished. The amount garnished may be decreased if the current amount severely impacts the consumer's ability to support himself or herself and any dependents, or if the amount exceeds state or federal limits.
Wage Garnishment Protections
Federal law restricts the amount that can be garnished to no more than 30 times the federal minimum wage, or 25 percent of the consumer's disposable income, whichever is less. In addition, New Jersey law provides even greater protection for consumers, stating that no more than 10 percent of a consumer's wages or income may be garnished unless a consumer earns more than 250 percent of the poverty level.
In New Jersey, certain paycheck deductions are exempt from wage garnishment, including:
- Federal, state and local taxes
- Social Security payments
- State pension payments
In addition, any payments from workers' compensation, unemployment insurance, crime victims' compensation and public assistance or benefits are exempt from wage garnishment.
Wage garnishment can be embarrassing for employees because it makes their employers aware of their financial situations. However, federal law prohibits employers from firing employees because their wages have been garnished (for the first time), and New Jersey law makes it illegal for any employer to use wage garnishment as reason to discipline, fire or discriminate in hiring a worker.
Wage garnishment is considered a debt collection tool of last resort mainly because of the required court proceedings. And, both creditors and consumers often wish to avoid wage garnishment. If you are having trouble paying your bills, there are options to consider that may help you prevent wage garnishment. It may be possible to negotiate a payment plan with your creditor, or filing for bankruptcy may be a way to get relief from your debt.
If you have been served with notice of an application for execution against wages, would like to know more about wage garnishment or are wondering how bankruptcy can help you, contact a knowledgeable bankruptcy attorney in your area.