Thanks for your question.
Your broker is wrong on both accounts.
Federal law places limits on wage garnishment amounts. While states are free
to impose stricter limits, California has not done so. That means the federal
law governs in California. Here are the rules:
For any given workweek, creditors are allowed to garnish the lesser of:
- 25% of your disposable earnings, or
- the amount by which your weekly disposable earnings exceed 30 times the
federal hourly minimum wage.
"Disposable earnings" are those wages left after your employer has made
deductions required by law.
Example. Let's assume you earn $1,000 per week and your net
wages (disposable earnings) are $700 after all required deductions. If the
current federal hourly minimum wage is $7.25, multiplying it by 30 gives us
$217.50. This means that your wages can be garnished up to $175 ($700 times 25%) or $482.50 ($700 minus $217.50) per week, whichever is less. As a result, your
wages may be garnished up to $175 per week.
In regard to your bankruptcy question, the bankruptcy filing will automatically stay the wage garnishment order. You would need to file a notice of bankruptcy in the court which issued the wage garnishment order and would need to request an immediate order form the court staying the garnishment until the bankruptcy is resolved. Any transfer that occurs after the bankruptcy is filed must be reversed.
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