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TexLaw, Attorney
Category: Legal
Satisfied Customers: 4430
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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I am real estate agent (100% commission, independent contractor)

Customer Question

I am real estate agent (100% commission, independent contractor) in Southern California. I have a judgment against me from an HOA on a property that was foreclosed on in 2010. The HOA has served a wage garnishment to my Broker. My broker is telling me that she has to pay the entire judgment amount which would take a huge % of my commission. I have told my broker that other agents in other real estate offices only had max 25% of their commission checks taken for wage garnishments and even IRS liens. What is the correct answer?

Also, my broker has told me that even if I file bankruptcy before the escrow closes that she still has to pay the entire lien amount that the automatic stay does not apply because the escrow was opened before the bankruptcy was filed.

An agent friend in another office had similar issue and their broker said it is up to the bankruptcy court to decide how much of the income is protected or exempt and paid the agent 100% of the commission because their broker said automatic stay is in place until it is lifted. Her broker told her that up to 25% of the income is the rule because it is treated like accounts receivables but after you take out taxes and expenses that uses up the 25% so usually nothing is left for creditor to receive out of the bankruptcy case or you can use exemptions to protect the income. My question is does my broker have to pay the wage garnishment if the bankruptcy is filed before escrow closes??

Submitted: 4 years ago.
Category: Legal
Expert:  TexLaw replied 4 years ago.


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.

Please let me know if you have further questions. Please
also kindly consider rating my answer. Rating does not cause you an additional
charge and will not prevent us from further discussing your questions.

Best Regards,


Customer: replied 4 years ago.

I am 100% commission and get paychecks only when escrows close so it can be months between paychecks. So, max deduction is 25% correct?


Also, shouldn't my broker pay me 100% of commission if the bankruptcy is filed and I give copy of the BK filing to my broker?



Expert:  TexLaw replied 4 years ago.

The max they can take out is 25% on a wage garnishment

If you declare bankruptcy, you get the full commission and are expected to make payments pursuant to the bankruptcy plan. The bankrutpcy court may order you later on to make payments to the bankruptcy trustee, or the trustee may garnish your commissions (but that's up to the bankruptcy court and you).