What types of income are protected from wage garnishment?

State laws exempt some income, particularly disability payments and pensions

By Sally Herigstad

To Her Credit

Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets. Ask Sally a question, or read her previous answers in the To Her Credit archive

Dear To Her Credit,
What kinds of income can be garnished? I am 61 and live on my retirement/disability from the California State Teachers' Retirement System. I receive about $1,800 per month.

I had a heart attack in November 2009 and just received a bill from the ambulance company for $1,500. I was told that unless I make payments of $100 per month (I cannot), it will go to collections.

I filed for bankruptcy in 2008 due to debts from a divorce. My daughter, a full-time student, lives with me. I am terrified that any amount can be deducted from my income.  -- Nicole

Dear Nicole,
Relax -- the ambulance company is not going to garnish your income for two reasons. One, your income is likely to be less than the exemption amounts that apply to you. Joshua P. Friedman, a California collections and judgment enforcement attorney, says, "There are lots of exemptions that apply to wages -- some are federally mandated and some vary from state to state (and there are often still exceptions to the exemptions)."

The second reason the ambulance company won't garnish your income is because your income is from a disability and retirement plan. Friedman writes in an e-mail, "Based on the facts stated (retirement benefits of $1,800 per month), in California, if the judgment is not based on a child or spousal support order, payments from a retirement plan for annuity, pension, retirement allowance, disability payment or death benefit are fully exempt (Cal Civ Pro Sec. 704.115 and 704.110). This means if the debtor receives payments from a retirement plan, no creditor can take that money."

Just because they can't garnish your wages, however, doesn't mean you can ignore the debt. It's essential you communicate with the ambulance company to avoid a negative mark on your credit report and additional fees and interest. Plus, unresolved bills cause stress -- the last thing you need!

Here's what you should do:

1. First, make sure your insurance company has paid its share. Often, it takes a while for insurance to process the bill. Call if you're not sure of the bill's status.
2. Contact the ambulance company and ask if it has a charity program for the disabled and retirees on fixed incomes. Medical providers often have such programs, but it's up to you to ask. You may be required to submit proof of income, a monthly budget and other information to qualify.
3. Negotiate a payment plan you can live with. It may be easier to do this if the company has a local office with an account representative you can sit across the table from. Be sure to bring your income and expense information so you can show what you can afford. If your minimum expenses are as much as your income, the representative should be able to see that. The company may write the bill off if it is convinced there's no money to be had, or it may settle for a reduced amount. Get everything you agree to in writing.
4. Once you settle on a more reasonable payment plan, stick to it faithfully.

Here's what not to do:

Don't ignore this bill, but don't lose sleep over it, either. Ambulance companies transport people every day, and a good share of their customers cannot afford to pay the full fee. Many people have been in the same situation you are in -- that's why there are solutions available.

Don't consider bankruptcy. It's not necessary and would cost you more than the ambulance bill.

And don't even think about putting this bill on your credit card! Once it's on a credit card, the bank is not likely to negotiate below the amount it paid the ambulance company; indeed, it would be unreasonable to expect that. And the interest on a credit card would make that $1,500 bill grow more expensive every day.

See related: How wage garnishment works -- and how to avoid it, 15 tips for paying high medical bills, Can Social Security benefits be garnished over card debt, Take these steps to avoid wage garnishment

Gary Foreman, "New Frugal You"

Sally Herigstad, "To Her Credit"

Cathleen McCarthy, "Cashing In"

Jane McNamara, "Let's Talk Credit"

Elaine Pofeldt, "Your Business Credit"

Erica Sandberg, "Opening Credits"

Published: March 26, 2010

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