What Is Wage Garnishment?

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DEFINITION
Wage garnishment is a process that withholds a portion of an employee’s earnings to repay a debt they owe.

Wage garnishment is a process that withholds a portion of an employee’s earnings to repay a debt they owe. It’s often put into effect by a court or government entity when a person hasn’t responded in a timely manner to other requests for payment.  

Definition and Example of Wage Garnishment

Wage garnishment is a legal or equitable procedure where a portion of a person’s earnings are withheld from them and paid to the party to which they are owed. In many cases, the garnishment is ordered by the court. However, it can also be initiated by the IRS, state tax collection agencies, or other federal agencies.  

For example, say Michael is required to pay child support to Maria but has not paid the amount owed in full. Maria can go to court and get a court order that garnishes Michael’s wages. In turn, he will receive a reduced paycheck while Mary will receive the withheld portion. The garnishment will continue until the outstanding debt is paid in full. 

How Wage Garnishment Works 

Wage garnishment functions as a means to ensure a debt will get repaid. It’s often one of the last steps taken to get a person to pay who has not yet responded to other requests for payment. 

The Wage Garnishment Process

The wage garnishment process starts when a debt is owed and the person does not make their payments as agreed. The unpaid debt could be from a variety of sources, such as a medical bill, car loan, civil judgment, child support order, student loan, state tax bill, or federal tax bill. 

Non-government entities will need to get a court order to garnish wages while government entities can garnish without the assistance of the court.

Once a wage garnishment is initiated, the person’s employer will be notified and will be required to withhold a certain amount of the employee’s earnings until the debt is repaid in full. Earnings can include wages, commissions, bonuses, salaries, retroactive merit increases, and lump sums. If you don’t want your wages garnished, there are steps you can take such as talking to your creditor or challenging the garnishment. 

CCPA Limitations on Wage Garnishments

Title III of the Consumer Credit Protection Act (CCPA) limits the percentage of a person’s disposable wages that can be garnished per week. 

Disposable wages are the amount of pay left over after required deductions like taxes, Medicare, Social Security, and State Unemployment Insurance tax.

In most cases, the maximum amount that can be garnished is 25% of your disposable earnings. However, your wages can’t be garnished if your disposable earnings are 30 times the federal minimum wage or less. For example, the federal minimum wage is $7.25, so if you worked 30 hours in a week and earned $217.50, no garnishment could be applied.

The 25% rule maximum applies once you make at least 40 times the federal minimum wage. If you earn between 30 and 40 times the federal minimum wage, wages above the 30 times figure can be garnished.

Here’s an example: Let’s say Nina owes $2,000 for a medical bill and has her wages garnished through a court order. She makes $500 in disposable income each week, so 25% ($125) is withheld from each paycheck. After 16 weeks, she’ll have repaid her debt in full and the garnishment will be removed. 

If Nina only made $250 per week, however, her wages would be over the federal minimum wage times 30 ($217.50), but under the minimum wage times 40 ($290). As such, only the amount above $217.50 would be withheld each pay period, which would be $32.50 per week. She would pay off her debt in 62 weeks.

If you owe child support or alimony, up to 50-60% of your wages could be garnished, plus 5% for payments more than 12 weeks late. Further, the limits don’t apply to certain bankruptcy court orders or to federal and state tax debts.

Federal agencies collecting non-tax debts can only order an employer to pay up to 15% of a person’s earnings without a court order. In addition, federal law prohibits employers from discharging employees due to having garnished wages. 

Key Takeaways

  • Wage garnishment involves the involuntary withholding of an employee’s earnings to repay a debt. 
  • In most cases, up to 25% of a person’s earnings can be withheld per week.
  • Amount limitations don’t apply to federal or state tax debts and some bankruptcy court orders.
  • Wages can’t be garnished if you make the federal minimum wage times 30 or less. 
  • Wage garnishments for child support or alimony orders can take up to 65% of earnings.

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