Wage Garnishments and Your Credit
If you receive a judgment and still don’t or can’t pay the debt, your employer may be court-ordered to garnish part of your paycheck to pay off your creditor. After the court orders a wage garnishment, certain rules must be followed as defined in the Consumer Credit Protection Act (CCPA). Remember that state law can take precedence over federal law, but only if the amounts allowed for garnishment are lower.
How to dodge wage garnishments
Before anyone can garnish your wages, a judgment from a court of law is necessary. You get a summons to appear in court to defend yourself against a suit for payment brought by the owner of your debt.
If a judgment is issued and the debt remains unpaid, the creditor can go back to court and execute the judgment to push matters to the next stage, which may include having your wages garnished. You receive another summons if this happens.
Each state has its own debt collection laws. Some states permit a creditor to garnish your wages. Some states exempt large amounts or categories of assets from attachment or seizure by a creditor to pay your debt. Others may force you to sell possessions to satisfy a judgment. The best source for up-to-date information is your state’s consumer protection office. Check out the Directory of State and Local Consumer Agencies.
In many cases, you can avoid wage garnishments by doing the following:
Keep complete records of the collection process. Be sure to keep a record of names, dates, copies of correspondence, summaries of conversations, and any agreements or disputes.
Show up in court when you’re supposed to. Go to the hearings and speak up! If you have a reasonable story to tell the judge and a reasonable offer to make, you may be surprised at the result. The judge won’t be happy that a collector is wasting his valuable time with a case that should have been settled out of court.
State law may set garnishment limits lower than the federal maximum. In that case, the state law supersedes the federal law. The CCPA says that your boss can’t fire you for having a garnishment.
However, the CCPA doesn’t provide this protection for multiple wage garnishments. You can find much more information on wage garnishments by calling the U.S. Department of Labor at 866-487-9243 or by visiting their website and clicking on the Garnishment tab.
CCPA protections don’t apply to the following types of nondischargeable debts:
Child support and alimony: The court has little sympathy in matters of back support payments. The garnishment law allows up to 50 percent of your disposable earnings to be garnished for child support and alimony if you’re supporting another spouse or child and up to 60 percent if you’re not. An additional 5 percent may be garnished for support payments that are more than 12 weeks in arrears.
Debts owed to the government: The garnishment restrictions don’t apply to certain bankruptcy court orders or to debts related to federal or state taxes. A consumer debt such as a credit card or personal loan can be garnished up to 15 percent and a student loan up to 10 percent. If you’re being garnished for more than one debt, you’re subject to a 25 percent maximum.
If a state’s wage garnishment law differs from the CCPA, the law that results in the smaller garnishment must be observed.
How much can be garnished?
After your creditor is granted a judgment, you may wonder how much the court can order your employer to garnish from your wages. The court uses disposable earnings (the amount left after legally required deductions like taxes, FICA, mandatory retirement withholding, and unemployment insurance) to figure your garnishment amount.
Whether you have one or more garnishments, the law sets the maximum amount that your employer may garnish in any workweek or pay period. Exceptions are made for court-ordered support, bankruptcy, or state or federal tax. The amount may not exceed the lesser of two figures: 25 percent of your disposable earnings or the amount by which your disposable earnings are greater than 30 times the federal minimum wage.
|$217.50 or less: none||$435.00 or less: none||$471.25 or less: none||$942.50 or less: none|
|More than $217.50 but less than $290.00: amount above $217.50||More than $435.00 but less than $580.00: amount above $435.00||More than $471.25 but less than $628.33: amount above $471.25||More than $942.50 but less than $1,256.67: amount above $942.50|
|$290.00 or more: maximum 25%||$580.00 or more: maximum 25%||$628.33 or more: maximum 25%||$1,256.66 or more: maximum 25%|
These restrictions don’t apply to garnishments for child and/or spousal support, bankruptcy, or actions to recover state or federal taxes. Source: U.S. Department of Labor.