Can Creditors Garnish Self-Employment Income?

When you owe money to a creditor, one of the potential strategies that it could use to collect is a wage garnishment. However, if you are self-employed, you do not earn a regular wage from an employer. When this happens, it can be difficult for a creditor to garnish your wages.

Wage Garnishment

The basic idea behind a way to garnishment is that a creditor gets a judgment against you and then uses that judgment to take money out of your paycheck. The money from the garnishment is provided directly from the employer. This takes the responsibility out of the hands of the debtor and puts it on the employer. Once the debt is paid off, the wage garnishment is then ceased and the employee gets to keep his entire paycheck again.

Self-Employed Garnishment

When an individual is self-employed, she does not receive a regular paycheck from an employer. The money that is received by a self-employed individual does not have taxes taken out of it. Even if a company regular pays this person a wage as an independent contractor, no money is taken out for taxes. This means that the money cannot be withheld for a creditor. The money goes to the self-employed individual first before it could be withheld for the benefit of a creditor.

Ordered Payments

Although a self-employed individual cannot necessarily have his wages garnished, you can be ordered to pay a debt by the court. If a creditor files a lawsuit against the debtor and gets a judgment, the court can order the self-employed individual to pay the debt. This means that it is up to the debtor to handle the payment instead of an employer. If the payment is not made by the deadline, the debtor can face some serious consequences from the court.

Garnishment Alternatives

Even if a creditor cannot take money directly out of your paycheck, some other options exist for getting the money you owe. Creditors can take money directly out of your bank account through a levy in some cases. They could also place liens on your property that makes it impossible for you to sell the property until the debt is paid. This means that although wage garnishment may not be a direct threat, debt collectors can still get money from you in other ways.