Court Says Independent Contractor Can Assert Head of Household Exemption

Clients planning for asset protection sometimes debate whether they should work as an employee or as an independent contractor. Employee wages are subject to a continuing wage garnishment, but the Florida Statute 222.11 clearly exempts wages paid to one who is head of household. Payments to independent contractors may be garnished, but garnishment is more difficult because there are no “continuing writs” against contractor payments. A creditor has to separately discover and garnish each payment when due and payable.

Because payments to independent contractor usually differ each time depending upon the contractor’s work and time my understanding was that a debtor could not use the head of household wage exemption to exempt contractor payments. A recent Florida bankruptcy case examined a situation where an independent contractor did receive periodic payments of a fixed sum plus commissions. The debtor claimed a head of household exemption in of payments that he had deposited in his bank account.

The court held that the payments were exempt in the bankruptcy because the debtor was head of household. The debtor worked as real estate salesperson. He was not an employee. He was not on salary. He signed an independent contractor agreement with the real estate broker. The broker paid the debtor a fixed amount each month as an advance on future commissions.

The court said that the debtor could use the head of household exemption even though he was an independent contractor because he was paid a fixed sum on a periodic basis. The commissions when paid were also exempt because the statute specifically mentions commissions as a form of exempt earnings. The case shows that a person does not have to be an employee to claim exemption as head of household provided he is compensated fixed amounts of money each pay period. .

About the Author

Jon Alper is an expert in asset protection planning for individuals and small businesses.

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