Monday, December 5, 2011

Can Self-Employment Income Be Garnished in Ohio?

Wage garnishment occurs when a creditor or collection agency, after making attempts to collect a debt from you, files a civil suit and obtains a judgment against you. A judgment affirms that you owe the debt and gives the creditor the right to take aggressive action to recover the debt, including placing a lien on your home, freezing your bank account and taking a portion of your wages. Self-employment status does not protect you against wage garnishment in Ohio.

Ohio Law

    Ohio follows federal law in regard to wage garnishments initiated by a judgment creditor. Certain types of income, such as Social Security income, disability benefits and unemployment benefits, are exempt from garnishment. However, most types of income can be taken by a judgment creditor. This includes self-employment income, whether paid on a monthly, biweekly, weekly or sporadic basis. It also includes income you earn from commissions.

Percentage Limitation

    In Ohio, a judgment creditor may only garnish 25 percent of your disposable income. For an employed worker, disposable income means the amount left over after the employer has deducted tax withholdings. Because self-employment income is not subject to tax withholdings -- a self-employed person is responsible for paying his own taxes -- the judgment creditor may elect to take 25 percent of everything you earn.

Alternative Limitation

    If you are self-employed but earn a low income, an alternative test may determine the amount a judgment creditor may garnish in Ohio. Under the alternative test, all weekly earnings equal to the federal minimum wage multiplied by 30 are exempt from garnishment. The federal minimum wage is $7.25 per hour as of June 2011. This means that $217.50 of your weekly earnings are protected. The judgment creditor may garnish the remainder or 25 percent of your total earnings, whichever is less.

Considerations

    Only a total of 25 percent of your earnings may be garnished, even if your wages are subject to garnishment by more than one creditor. The courts approving the garnishments typically determine what part of the 25 percent each creditor receives. The 25 percent limitation does not apply to tax garnishments, alimony or child support obligations in Ohio.

    The judgment creditor must give you at least 15 days' written notice before asking the court for permission to garnish your wages. You may avoid garnishment by completing the "Payment to Avoid Garnishment" form supplied by the creditor, attaching earnings documentation and sending the creditor any payment that it would have otherwise garnished from your earnings.

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