Medical debt is a significant stressor for many people, especially when compounded by health insurance uncertainty. When unable to make payments on a medical bill, the healthcare provider will typically seek payment using a number of tactics, one of which being wage garnishment.
The Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act took effect in 1978. According to the Federal Trade Commission (FTC), medical bills, along with credit card debt, auto loans, student loans, mortgages and other household debts, are covered under the FDCPA.
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The FDCPA was put in place to protect debtors from unfair, abusive and deceptive debt collection practices. According to Cornell Law School's Legal Information Institute, the FDCPA establishes ethical guidelines for debt collectors, covering only consumer debts and not business debts.
The FDCPA, as outlined by Cornell Law, includes protocols regarding the acquisition of location information, communication, harassment or abuse, false or misleading representation and other details relating to debt collection. Regarding misleading representation, collectors cannot represent or imply that nonpayment will result in imprisonment, seizure or wage garnishment if it is not a lawful action, according to the FTC.
Garnishing Wages for Medical Bills
Yes, collectors can garnish wages to collect on medical bills. Still, unlike the situation described above, this only happens once the creditor sues the debtor for a final collections resort. Regardless of whether they are for-profit or nonprofit, all hospitals can garnish wages as a last resort, unlike state agencies.
When a creditor sues a debtor and wins, a judgment is passed which legally authorizes wage garnishment. According to the U.S. Department of Labor, creditors cannot garnish over 25 percent of the employee's earnings or 30 times the federal minimum wage (currently $7.25 an hour) after legally required deductions are made, whichever amount is smaller.
Once the court orders wage garnishment, the order is sent to the employer so the creditor can receive payment before you receive your wages.
Fortunately, not all income is subject to wage garnishment. For example, Social Security benefits are exempt from wage garnishment, including those collecting on medical bills.
How to Contest Wage Garnishment
Everyone reserves the right to contest the lawsuit over wage garnishments. According to Upsolve, an answer must be filed in court before the deadline listed on the summons. It is imperative that the answer is filed before the deadline, or a late filing could result in a default judgment in the creditor's favor.
By filing an answer, you can use the time to negotiate a repayment plan with the creditor. If, at any point, the creditor violated any guidelines stipulated in the FDCPA, the misconduct can be used by the defense to win the lawsuit. Misconduct can include suing after the statute of limitations has passed, if your health insurance wasn't billed first and other violations.
Filing for Bankruptcy
For many people, wage garnishment can be a weight they cannot escape, eating away at their disposable income. While filing for bankruptcy is not ideal, it can provide some relief. According to Upsolve, an automatic stay is put into place once a bankruptcy case is filed, meaning all debt collections cease.
While not the best solution for everyone, those who are eligible to file for Chapter 7 bankruptcy may be able to find some relief. Other people may be eligible for Chapter 13 instead.
Consider also: The Statute of Limitations for Third-Party Debt Collectors