Wages Garnishment Exemptions for the Self-Employed
When a creditor obtains a judgment from a Florida court, they become known as a “judgment creditor”. One of the ways a judgment creditor collects on his or her judgment is through “garnishment”. In a garnishment proceeding, a judgment creditor may try to satisfy the judgment by pursing several different avenues; one of the most popular is the garnishment of the debtor’s wages through a writ of garnishment. What makes the Florida wage garnishment particularly effective is the continuing application of the writ. A single writ served on the debtor’s employer will garnish all of the debtor’s salary and wages as they become payable in the future until the judgment is satisfied or the garnishment is dissolved. However there are several exemptions.
Florida statutes provide an exemption from garnishment of earnings payable to a head of household whether denominated as wages, salary, commission, or bonus. For a debtor to qualify as a head of household he must provide more than half of the financial support for another person to whom he has either a legal or moral obligation of support. The supported person may be a child or an adult, and the supported person need not reside in the debtor’s homestead.
Anyone who owns his or her own business will have a difficult time falling within the head of household wage garnishment exemption. When a judgment debtor owns his or her business (and in turns owns his or her employer) there is a strong likelihood that he or she has the ability to control the amount and timing of payments, and as a result a court will most likely determine that the payments from the debtor’s own company do not constitute “earnings” within the wage garnishment statutory exemption. What business owners typically try to do is make their compensation look more like business profits than regular wages. In order for this to work business owners need to be very cautious.
In a recent court decision on the issue a Florida bankruptcy court denied the wage exemption for the proceeds the debtor received from his own business considering the absence of a written employment agreement, the irregularity of the timing and amount of “salary” payments, and the fact that salary resumed and increased in the months just before the bankruptcy. This bankruptcy case illustrates, that the self-employed debtor’s eligibility for head of household wage exemption depends on the facts of each case and particularly on whether the debtor’s compensation is similar to compensation payable to non-owner employees in the same business.