Friday, January 3, 2014

Inventing a Kentucky Wage Garnishment Hardship Exemption

I have found at least one state that provides for a discretionary exemption in a wage garnishment based upon the debtor's claim of economic hardship. I have located nothing in Kentucky law that is expressly similar.

Oklahoma Statutes §31-1.1.provides, in part:
"Earnings from personal services - Exemption from process - Order.
"A. Following the issuance of [a] . . . garnishment . . . the debtor may file with the court an application requesting a hearing to exempt from such process by reason of undue hardship that portion of any earnings from personal services necessary for the maintenance of a family or other dependents supported wholly or partially by the labor of the debtor. A debtor with no family or other dependents may not claim an exemption under this section. . .
"B. In determining the existence of an undue hardship, the court should consider the income and expenses of the family and other dependents, and the standard of living created by the income and expenses. The court should also consider the standard of living in relationship to the minimal subsistence needs of the debtor’s family and other dependents, with comparison to the minimal subsistence standards in the community, in regard to basic shelter, food, clothing, personal necessities and transportation. The court should then determine if the lack of the funds sought to be exempt would be an undue hardship by creating less than a minimal level of subsistence. If deprivation of these earnings would create an undue hardship on the debtor and the family or other dependents the debtor supports, the court may:
"1. Order all or a portion of the personal earnings exempt . . . . 
[emphasis added]
Kentucky's exemption statutes do embody the concept of reasonably necessary support as being an essential factor for claiming particular types of exemptions. For example:

KRS § 427.150(1);
"To the extent reasonably necessary for the support of an individual and his dependents . . .  rights to receive money or property for alimony, support, or separate maintenance." [emphasis added]  
KRS § 427.150(2)(b);
"A payment on account of the wrongful death . . .  to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;"  [emphasis added]
KRS § 427.150(2)(d);
"A payment in compensation of loss of future earnings . . .  to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;"  [emphasis added]  
The Kentucky statutory limit on wage garnishment in KRS § 427.010(2), which is not a true "exemption" according to the Kentucky Court of Appeals in Brown v. Commonwealth, 40 S.W.3d 873 (1999), provides, in relevant part:
". . . . the maximum part of the aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may not exceed the lesser of . . . . " [emphasis added]
The language of KRS § 427.010(2) suggests the determination of an individual debtor's wages subject to garnishment is not a mechanical calculation, and there is a space from within which the debtor can reasonably argue the financial circumstances of his or her specific case justify the court to limit a wage garnishment to less than the maximum allowed by statute, down to and including zero, within the court's sound exercise of discretion.