Wage garnishment isn’t exactly a common term and can be embarrassing to discuss, even though 7.2% of the population had experienced it at some point. The same report showed that a surge in defaulted loans since 2006 has led to more than $665 million amassed through wage garnishment in the fiscal year ending September 2016.1
A wage garnishment is when a court order requires your employer to withhold a portion of your paycheck, so it can be paid directly to a person or organization to whom money is owed. The collection will then proceed until the debt has been paid in full or stopped by another court order.
The difference between a wage garnishment and a nonwage garnishment – also known as a bank levy – is that a nonwage order allows creditors to tap directly into your bank account instead of going through an employer.
Types of debt that could lead to a garnishment
There are different forms of debt that could result in a wage garnishment. That same study mentioned earlier found that child support obligations, alimony payments and tax liens are the types typically reported. But student loans, medical bills, credit card debt and court judgements are also common.
- Child support and alimony both require an initial court order for garnishing wages. Depending on the situation, up to 60% of a paycheck can be requested. That number can go up if payments go into arrears for an extended period of time.
- Back taxes don’t require a writ of garnishment, though there may be exceptions based on dependents and existing tax deductions. State and local agencies also have the right to take a portion of wages, not just the federal government.
- Student loan default doesn’t require a court order, either. Notification is given 30 days before garnishment begins and wages up to 15% of income can be taken.
- Medical bills and credit debt require a court order for wage collection. The creditor must first sue and obtain a judgement before getting an order to begin the process.
Protections for those with a garnishment
While federal law places some limits on how much of a paycheck can be reduced (either up to 25% of disposable income or an amount by which weekly income surpasses 30 times the federal minimum wage, whichever is lower), state laws take precedence if they are more restrictive.
Title III of the Consumer Credit Protection Act (CPAA) limits earnings that can be taken. However, their broad definition of earnings includes wages, salaries, commissions, bonuses, vacation pay and pensions and retirement funds – though it usually doesn’t include tips.
Additionally, the CPAA protects workers against firing or reprisal by employers for one garnishment. However, if more than one creditor begins to collect, there are fewer protections in place.
What to do when faced with a garnishment
First, creditors are legally required to notify you of an impending garnishment. You may then have some time to file a dispute against the claim. Just keep in mind that the window for filing may only be a few days long. Challenges could be based on anything from typos in the filing to a case of mistaken identity or the debt having been settled via bankruptcy. You may even qualify for leniency based on individual circumstances.
Another possible option is to speak with the company directly about stopping the collection. They may be willing to work with you on an alternative payment plan, saving time and court costs for you both.
If speaking with your creditor and/or your court challenge fails, you will have to pay the amount specified. This can usually be done in a lump sum or through installments. Though you may be able to claim concessions due to circumstances – or even file for bankruptcy – speaking with an attorney will give you a better understanding of your options.
After it’s taken effect, a wage garnishment’s court order will become part of the public record and can cause long-term damage to your credit report. Some garnishments can stay on your report up to 10 years, and tax liens can remain for even longer. Each instance could also lower your credit score by 150 points per mark.
How to get through a garnishment
Because every state has its own laws and individual debts will vary, the best thing to do would be to contact an attorney. They will be able to help explain the garnishment process and assist with the paperwork attached to it.
This wage garnishment calculator may be able to provide you with an idea of what your payments could look like and give you a general idea for planning purposes.
In the end, garnishment of wages may serve as a chance to start fresh with new spending habits, better budgeting and a clean slate.
1. Fay, Max. “Garnishment process.” April 2, 2019. Debt.org. https://www.debt.org/garnishment-process/