Bank finance articles and tips

More and more people are getting into debt these days. From bad decisions when purchasing a home to overusing a credit card to buying too much "stuff", the more of these impulse buys we make the more we are going to lose in the end.

Creditors can almost reach into your bank account and take your money without your approval. This is called garnishment and it is a lawful tool for creditors to get the money you own them. It is often the last thing they want to do because they have to take you to court and this includes court fees and a lot of time wasted for all parties involved.

The most common garnishments are for child support, defaulted student loans and unpaid taxes. There are certain ways to avoid this and the process in which money is taken from your bank account or even your paycheck has certain exemptions.

The government limits the amount allowed to be taken so the debtor has enough money left to survive. Different states have different restrictions so depending on where you live, more or less will be taken. The maximum that can be garnished is 25% of your paycheck and your employer has to comply with the order. If it is for child support than up to 50% can be taken. One way or another they are going to get a good chunk of your money so the best thing to do is to avoid this all together.

If you don't want this to happen, file a motion with the court and they should grant you an exemption you can bring to the bank. A special form to claim the exemption is available at the court that has sent you the writ of garnishment.

What about social security benefits, are they exempt from garnishment? It depends. If you place that money into a regular savings or checking account in your bank, they have the right to take it out. As long as the money is liquid in your bank, it's liable to be used to pay off your debts.

There are other ways to stop garnishment from happening at all. You will receive more than one notification before it happens so obviously the best thing to do is just to pay it off on time. If you can't for whatever reason, you need to forget about being afraid and either go meet with your creditors or give them a call and figure out how you can come to an agreement for a new payment plan.

Sometimes working with a debt relief agency can help you organize your credit and see how it can be fixed. Many of them don't charge much and it's not as difficult as you think.

Jenny Miles writes about financial problems such as debt management and bankruptcy. Learn more about your options for how to claim exemption from garnishment on her blog.

By Jenny Miles
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