Struggling with medical debts is one of the most common reasons people file for bankruptcy relief. A person sustains an injury in an accident or becomes ill. The hospital expenses and other medical bills are overwhelming. Even with health insurance, they might owe thousands of dollars in medical debts they cannot pay. An order to garnish your wages is just one way a hospital could collect the debt you owe.
Healthcare providers, including hospitals, can take one or more legal actions to collect medical debts. Depending on the laws in your state, which might include an order to garnish your wages. However, before you assume you have no right to fight the hospital, let’s review three important things about hospitals garnishing a person’s wages.
In most states, the hospital must file a debt collection lawsuit before it can garnish your wages. A debt collection lawsuit alleges that you owe the hospital money you have not paid. It is the same process that a credit card company or other unsecured creditors would take to collect a debt.
When you receive the lawsuit, you have a short time to file a response. Most states allow 20 to 30 days to file an answer or response to the lawsuit. The court grants a default judgment if you do not respond to the lawsuit. The judgment states that you owe a specific amount to the hospital. The amount includes the medical debt, attorneys’ fees, filing fees, interest, and other lawsuit costs.
It is generally in your best interest to respond to the lawsuit. Ask for proof of the debt. Often, hospitals bill for charges they did not provide. The hospital may have included amounts that were paid by insurance. You should review the detailed billing reports to search for errors.
Furthermore, if the hospital broke any consumer protection laws, the court could rule that the debt is invalid. Also, the hospital must file a lawsuit before the statute of limitations expires. A debt collection attorney can review the case to determine if there are other defenses to the legal action.
However, unless you prove you paid the debt, the court enters an order for the amount the hospital can prove is a valid debt. After the hospital receives an order of judgment from the court, it may request the court issue a wage garnishment order.
Check your state laws to determine whether creditors can garnish wages for judgments. A few states only allow certain creditors to garnish wages. Therefore, the hospital may not be able to garnish your wages even though it obtains a judgment.
IMPORTANT NOTE: Some states allow hospitals to collect debts from state tax refunds without a judgment. Therefore, your state tax refund could be applied to the hospital debt even if the hospital does not file a lawsuit.
Some states allow garnishment and some states do not allow garnishment for debt. There's also certain limits that can be garnished. As such, we looked into all 50 states guidelines and created a garnishment calculator below to estimate how much the creditor can try to take from you.
Even though the hospital has a judgment and the court issues a wage garnishment order, it does not mean that wages will be garnished. Federal and state laws limit the types of income creditors may garnish. For example, Social Security income, Veterans Benefits, and many other types of federal and state government aid and income are not subject to garnishment.
The laws also limit the amount of money the creditors may receive from each pay period. For example, creditors may garnish disposable income. Disposable income is the amount of income after legally required deductions.
Furthermore, federal law sets maximum amounts creditors can garnish from a paycheck. That amount does not increase if you have more than one wage garnishment order.
By federal law, the maximum wage garnishment is the lesser of:
Some states set different wage garnishment amounts. Therefore, the wage garnishment laws for your state could differ from the federal laws.
Filing bankruptcy gets rid of judgment debts and wage garnishment orders. As soon as you file a bankruptcy case, the creditor must stop garnishing your wages. The bankruptcy automatic stay prevents creditors from taking any actions to collect debts, including garnishing wages and continuing debt collection lawsuits.
Therefore, if you receive a lawsuit for hospital debt or other unsecured debts, you might want to consider filing bankruptcy to prevent wage garnishment. The bankruptcy case wipes out other unsecured debts you cannot pay.
However, filing for bankruptcy might not be the best option for everyone. While bankruptcy is an effective debt-relief tool that gives you a fresh start, you need to consider all relevant factors.
First, do you qualify for a Chapter 7 bankruptcy? Most people who file under Chapter 7 get rid of most or all of their unsecured debts four to six months after filing. However, there are income requirements for filing under Chapter 7. Also, if you own substantial property and assets, filing Chapter 7 could put those items at risk.
We have a free Chapter 7 bankruptcy calculator to help you determine if you qualify for Chapter 7. We also have a free bankruptcy exemption calculator that helps you determine if your property would be protected in a Chapter 7 case.
If Chapter 7 is not right for you, you might want to file a Chapter 13 case. Chapter 13 is a debt repayment plan supervised by the court. It allows you to spread out your debts over three to five years.
You can prevent foreclosure and repossession by filing Chapter 13. Also, most Chapter 13 debtors only pay a small percentage of their unsecured debt instead of the entire amounts owed to those creditors. Use our free Chapter 13 calculator to estimate your Chapter 13 payments.
At Ascend, we help people get out of debt. Our team provides free financial services that can help you determine what type of debt-relief strategy is best for your financial situation.
Contact us today to speak with a member of our team. We provide compassionate support and guidance for individuals who need help with debt problems.
