How to Stop Wage Garnishment in Indiana (2024 Guide)

When you fall behind on loan or credit card payments, creditors will pursue collection. Phone calls and letters come first. If you ignore them, the situation escalates quickly.

Your creditor may sue you for the unpaid debt. A court judgment allows them to garnish your wages in Indiana. You can lose up to 25% of every paycheck until the debt is satisfied.

The good news? You have options to stop wage garnishment before it starts.

Indiana Wage Garnishment Laws

Indiana has strict wage garnishment rules. Creditors can seize a significant portion of your income once they win a judgment.

How Much Can Creditors Take?

According to Indiana Code § 24-4.5-5-105, creditors can garnish the lesser of:

• 25% of your weekly disposable earnings
• The amount your weekly disposable earnings exceed 30 times the federal minimum wage ($7.25)

Disposable earnings means your income after required withholdings like taxes. Social Security and retirement contributions don’t count as required withholdings for this calculation.

Can You Reduce the Garnishment Amount?

Indiana allows you to request a reduced garnishment between 10% and 25%. You must show good cause to the court. The judge decides whether to approve your request.

Exceptions to the Rules

Creditors typically need a judgment before garnishing wages. They must sue you and win first.

Three types of debt bypass this requirement:

• Past-due child support (up to 65% of disposable earnings)
• Back taxes
• Defaulted federal student loans

Government agencies can garnish wages for these debts without filing a lawsuit.

Real-World Example

Sarah earns $750 weekly in disposable income. She defaults on a $2,250 personal loan. The lender sues and wins a judgment.

Her employer now withholds $187.50 per paycheck (25% of $750). The garnishment continues for 12 weeks until the debt is paid. Sarah could petition for 10% garnishment ($75 weekly) if she demonstrates financial hardship.

Losing $187.50 weekly makes paying rent and car payments nearly impossible. Sarah could have avoided this outcome by acting before her court date.

How to Stop Wage Garnishment Before It Starts

Wage garnishment isn’t inevitable. You can fight back when a creditor sues you for debt.

File an Answer to the Lawsuit

An Answer is your formal response to the creditor’s Complaint. You must file it by the deadline on your court summons.

In your Answer, you’ll address each claim the creditor makes. You can raise defenses like:

• The debt amount is incorrect
• The statute of limitations has expired
• You already paid the debt
• The creditor lacks proof you owe the money

Filing an Answer prevents a default judgment. Without your response, the judge will likely rule for the creditor automatically. Our partner Solo can help you draft and file your Answer quickly.

Negotiate a Settlement

You don’t need to repay the full debt amount. Many creditors accept less through settlement negotiations.

Debt settlement means offering a lump sum payment for partial debt forgiveness. The creditor releases you from the remaining balance.

Why do creditors settle? They’d rather collect money now than wait months for wage garnishment payments. Settlement eliminates court costs and administrative hassles.

You might settle a $5,000 debt for $2,500 or even less. The exact amount depends on your negotiation skills and financial situation.

Repay the Debt in Full

Paying the full amount stops the lawsuit immediately. The creditor has no reason to pursue wage garnishment once you’ve satisfied the debt.

Consider these repayment options:

• Borrow from family or friends
• Use savings if available
• Sell unnecessary items
• Take a temporary second job

Full repayment clears your record. The creditor reports the account as paid, not settled.

Respond Quickly

Time matters in debt lawsuits. You typically have 20 to 30 days to file your Answer after receiving the summons.

Missing this deadline results in a default judgment. The creditor wins automatically and can begin wage garnishment proceedings.

Mark your response deadline on your calendar. Gather documentation about the debt immediately. Contact our partner Solo if you need help responding to the lawsuit.

What Happens During Wage Garnishment

Understanding the garnishment process helps you see why prevention is critical.

Your Employer Receives a Court Order

After winning a judgment, the creditor sends a garnishment order to your employer. Your employer must comply with the court order.

Your company’s payroll department withholds the specified amount from each paycheck. They send the money directly to the creditor or court.

The Garnishment Continues Until Satisfied

Wage garnishment doesn’t stop after one paycheck. The withholding continues until you’ve paid the full judgment amount.

Large debts can take months or years to satisfy through garnishment. You’ll struggle financially the entire time.

Your Employer Knows About Your Debt

Wage garnishment isn’t private. Your employer learns you have a judgment against you.

While federal law prohibits firing someone for a single garnishment, multiple garnishments may jeopardize your job. The situation can feel embarrassing and stressful.

Other Options If You’re Facing Wage Garnishment

Already dealing with wage garnishment? You still have ways to stop it.

File a Motion to Vacate the Judgment

If you never received the lawsuit summons, you can ask the court to vacate the default judgment. You must prove you weren’t properly served.

The court may reopen the case and give you a chance to defend yourself. Act quickly since deadlines apply.

File for Bankruptcy Protection

Bankruptcy immediately stops wage garnishment through an automatic stay. Creditors must cease all collection activity when you file.

Chapter 7 bankruptcy can discharge unsecured debts like credit cards and medical bills. Chapter 13 creates a repayment plan based on your income.

Both options have serious consequences for your credit. Consult with a bankruptcy attorney before deciding. You can speak with a bankruptcy attorney for free to explore your options.

Challenge the Garnishment Amount

Indiana allows you to petition for reduced garnishment if you’re experiencing hardship. File a motion explaining why 25% creates undue financial strain.

Bring evidence like:

• Rent or mortgage statements
• Medical bills
• Dependent care costs
• Other essential expenses

The judge may lower your garnishment to 10% if you demonstrate genuine need.

Protecting Your Income in Indiana

Certain income sources are exempt from garnishment in Indiana. Creditors cannot touch:

• Social Security benefits
• Supplemental Security Income (SSI)
• Veterans benefits
• Unemployment compensation
• Workers’ compensation
• Most pension and retirement funds

If your bank account contains only exempt funds, you can file an exemption claim. The court will release the garnished money back to you.

Keep exempt income in a separate account from wages. Mixing funds makes proving exemptions more difficult.

Taking Action Today

Wage garnishment in Indiana takes up to 25% of your paycheck. The withholding continues until the debt is satisfied completely.

You can avoid this outcome by responding to debt lawsuits promptly. File an Answer to prevent default judgments. Negotiate settlements before your court date. Communicate with creditors instead of ignoring collection attempts.

Time is your enemy when facing a debt lawsuit. The sooner you act, the more options you have. Don’t wait until garnishment starts to seek help.