Sometimes, one isn’t able to pay back loan on time. In some cases, the outstanding amount becomes too much. Garnishment is a process in which a third party pays the loan in installments to the lenders, instead of the second party, that is, the one that has to pay the outstanding amount. The most common type of garnishment is wage garnishment.
Wage Garnishment
In this, the employer pays for the employee’s debt. In fact a determined ammount is deducted from the salary of the employee every month, which is then paid to the lender by the employer. According to US Laws, it can’t exceed more than 25% of the salary drawn in most cases, and it can extend to maximum 50% of the salary drawn in some extreme and exceptional cases.
All about the IRS
People mention the IRS in the same breath as garnishment. However, it isn’t limited to IRS only. There are other organizations that can use this such as any creditor, public or private; or federal government, etc. Even in case a spouse hasn’t got the alimony, the spouse can claim for it, and get it passed, and hence, it isn’t just IRS. Though all have to follow a process sequentially, they need to get the order passed first. In that, the creditor needs to prove they asked for payment politely, and gave the option of paying back voluntarily, but there was no answer.
The process involves a thorough evaluation of the person’s monthly income, and minimum spending, and then the amount to be deducted every month is calculated. It is then approved by the court.
Asset Seizure = Garnishment?
Asset seizure is another term used synonymously with garnishment. Though both invoke lot of fear, it doesn’t necessarily mean the same. In asset seizure, the creditor sends a representative personally. They may even use physical force to cover the amount by taking away assets. Garnishment is legal and proper procedure is required. The credit amount is taken back in money, and not in assets.
Garnishment as a process can be looked upon as a monthly installment system also. Otherwise, it may be mentally exhausting if some creditor pushes it over defaulter.