Wage Garnishment Laws
When you have an unpaid debt, your creditor can seek a court order to take money directly from your paycheck. This process is known as wage garnishment. Your employer is required to withhold a portion of your wage and send it directly to the creditor. You can lose up to half your paycheck to garnishments while the debt remains unpaid.
Wage garnishments can have serious consequences on your ability to afford the essential of life. Fortunately, there are laws in place to protect you. Let’s take a closer look at wage garnishment laws.
The Legal Process of a Garnishment
Securing a wage garnishment generally requires your creditor to go to court. State law requires certain procedures be followed. Failure to do so you may be grounds to overturn the judgment.
- Step 1: A final demand must be sent to your last known address. It will inform you that a debt is owed and unless you arrange payments with the creditor, a creditor lawsuit will be filed.
- Step 2: If you don’t negotiate a payment plan, the creditor will file a Request for Garnishment on Wages in court. An attempt to serve the court papers must be made. You will need to go to court to protest the Request.
- Step 3: If you don’t dispute the action, the court typically signs the Request and it becomes a Writ of Garnishment. A “writ” is a formal command ordering a person or entity to take some action.
- Step 4: The Writ of Garnishment must be served on your employer via certified mail, restricted delivery, private process or sheriff/constable.
- Step 5: Your employee will begin withholding the required amount from your paycheck.
Limits on the Amount Garnished
Title II of the Federal Wage Garnishment Law, Consumer Credit Protection Act (CCPA) limits the amount of an individual's earnings that may be garnished. Consumer debt can be withheld up to 25% of your disposable income. For these purposes "disposable income" means all income after taxes. This doesn't include deductions for your living essentials like rent, food, and insurance.
This garnishment percentage applies no matter how many garnishments are in place. That means if you have three creditors with judgements, they must share the 25% of your disposable income. However, if the garnishment is for child support, the limit could be as high as 60 percent of disposable income.
Not All Wage Garnishments are Equal
They type of your debt will determine how much can be withheld and whether you have the right to go to court first. There are six common types of wage garnishment:
- Child support garnishments can attach to your paycheck without a court proceeding. Child support garnishments may withhold up to 65% of an employee's paycheck, using state-specific formulas.
- Creditor garnishments are debts that occur when a person is delinquent on consumer payments, such as credit card debt. The creditor may take the debtor to court and seek a wage withholding order for the outstanding debt. Private creditors, including consumer loans, credit cards and mortgages can withhold up to 25% of your disposable income.
- Bankruptcy, under Chapter 7 or Chapter 13, stops almost all garnishments. The “automatic stay” created by federal law prevents the continued collection of debts after you file bankruptcy. The “stay” goes into effect immediately upon filing your case. It is “automatic” because it doesn’t require getting a court order. Instead it’s effective by the very act of filing your bankruptcy petition. Tax levies and federal student loan garnishments are stopped temporarily by a bankruptcy filing, but may resume when the bankruptcy is finalized. Ongoing spousal or child support will continue regardless of bankruptcy filing.
- Student loans are either private or federal loans. A private student loan is treated like any other debt, and allows for garnishments up to 25% of your disposable earnings. A single or consolidated federal loan is withheld up to 15%. The U.S. Department of Education may contract with collection agencies to enforce and collect the defaulted loans but that does not allow them to collect at a higher rate.
- Tax levys are initiated by federal, state or local agencies. Each state differs in its requirements and most will release or modify the levy if it causes an immediate economic hardship. If you pay child support, you need to contact the tax agency directly. IRS and other tax agencies will release from levy the amount you need to pay court ordered child support.
Can I Be Fired Over Wage Garnishment?
You cannot be fired or disciplined over one wage garnishment, but you may not be protected if you receive additional garnishments. The Consumer Credit Protection Act does not apply if you have multiple wage garnishments. In fact, some states even allow employers to seek reimbursement for administrative costs related to handling multiple garnishments.
Learn More About Wage Garnishment Laws: Contact a Tax Attorney
Are you currently experiencing a wage garnishment or being threatened by a creditor? Are you uncertain what to do next? An experienced credit attorney can protect your rights and help you navigate the process. Learn about your legal options and get peace of mind by speaking with a tax law attorney near you.