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New rules on federal exemptions help clarify wage garnishment

Just getting by from day to day can be difficult enough for many Floridians with financial challenges, without the worry of having their wages garnished to pay off their creditors. Millions of people might find themselves facing wage garnishments before filing for bankruptcy. Some exemptions have been put in place to prevent people with certain types of income from suffering hardships resulting from wage garnishment.

A debt advisor has clarified some of the questions regarding wage garnishment exemptions. Before May 2011, banks would automatically freeze the bank accounts of people with a wage garnishment order, effectively cutting off their access to the money they needed for basic living expenses. A new rule regarding federal exemptions from wage garnishment is meant to keep consumers’ bank accounts from being frozen if the customer receives Social Security, government benefits, and most retirement income. Now banks are required to protect two months’ worth of direct-deposited exempt income without requiring customers to prove their exempt status immediately.

Consumers with exempt funds must still fill out a garnishment exemption claim form within a certain time period. Some debts, such as child support, spousal support, and government debts are not exempt from garnishment.

It may be necessary to prove exemption in front of a judge. The debt advisor recommends that if this is the case, it would be helpful to have a lawyer. The laws regarding wage garnishments and exemptions have been changed to protect struggling consumers, but they can still be confusing and require professional help to sort through.

Source: Bankrate.com, “How to protect money from garnishment,” Steve Bucci, April 1, 2013

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