Wage garnishment is extremely harmful to personal finances and can create significant embarrassment for the person whose wages are garnished. Wage garnishment allows a creditor to receive a percentage of a person's paycheck each pay period. It is possible to offer a settlement to end garnishment, but the creditor does not have to agree. A debtor seeking to end garnishment through a settlement should be willing to settle for the full amount in a lump sum -- or agree to pay more than than the amount due as part of a payment plan.
Taxes
The Internal Revenue Service and state governments have broad powers that allow them to initiate wage garnishment for past due taxes without going through the court system. Usually, government tax agencies garnish wages only as a last resort for collecting the debt. Employees seeking to end wage garnishment and offer a settlement for back taxes may need the help of an experienced tax attorney. Depending on the situation, the IRS and other agencies may agree to a payment plan to end the garnishment. However, it may be impossible to negotiate a settlement for less than the full amount due. Generally, tax settlements are available for people who clearly cannot pay. A person with regular employment may not qualify.
Consumer Debt
Debt collectors for consumer debt are also unlikely to settle a wage garnishment order for less than the full amount due. Debt collectors win garnishment orders after winning a civil lawsuit and a court judgment for the full amount of the debt. Garnishment gives them total leverage, and they are unlikely to end it without incentive. One option for the employee is to offer a settlement agreeing to pay more than the amount due. For example, on a $5,000 debt, the debtor may agree to a settlement paying $6,500, including a $2,500 payment upfront. That may be enough to entice the debt collector to drop the garnishment and accept regular monthly payments. The goal for the debtor is to end embarrassment at work prompted by the garnishment and to negotiate affordable monthly payments.
Counseling
Nonprofit credit counselors may be able to help with wage garnishment. Counselors approved by the U.S. Department of Housing and Urban Development can contact the debt collector to negotiate a settlement or payment plan. Referrals for government-certified counselors are available from charitable organizations such as the United Way.
Bankruptcy
Bankruptcy is an option if a settlement is not possible. Some people with multiple wage garnishments on different debts decide that bankruptcy is their only choice. Although it has a number of drawbacks, bankruptcy immediately stops all wage garnishment. Consultations with bankruptcy attorneys are usually free.
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