If you’ve never had your wages garnished…
congratulations. If you have, then you understand the frustration and frequent embarrassment that wage garnishment can bring.
The good news about wage garnishments and federal law is:
- You are protected from discharge by your employer due to one wage garnishment
- There are varying limits on the amount of your earnings that can be garnished each week
Wage garnishments exact a toll not only on you, but on your employer as well. So while an employer may not fire you for a single wage garnishment, this protection goes away when multiple garnishments are involved. Additionally, recurring financial problems that result in wage garnishments can send the wrong message to your employer.
Wage Garnishment and Tax Debt
Wage garnishments are a legal action requiring employers to withhold the earnings of an individual for the repayment of a debt. Wage garnishments can be enforced to pay back child support, unpaid alimony, credit card debt, or any financial liability ordered by a court of law or imposed by another legal procedure.
Frequently, the IRS will use wage garnishment as a method of collecting unpaid tax debt. In general, here’s how the process works.
Step 1: The creditor files paperwork with the courts to garnish your wages, unless the debt was incurred through a government agency, such as the IRS.
Step 2: You have a right to respond to the judgment, to obtain representation to prevent the garnishment, and to talk to the creditors to reach a settlement.
Step 3: Government agencies do not have to go through the court system. However, they need to notify you if they plan to garnish your wages.
Step 4: The court or government agency sends your employer a notice that you owe a debt.
Step 5: The employer sends a portion of your wages from each paycheck to the court until the debt is resolved.
An employer who fails to respond to a notice of garnishment can incur legal consequences.
Garnishment Restrictions Limited
Many people are under the impression that wage garnishments are always limited. However, there are certain cases in which wage garnishments can take a significant portion of your paycheck.
In most instances, the amount of earnings that may be garnished during a pay period is 25% of your disposable income or disposable earnings greater than 30 times the federal minimum wage. Disposable income is the amount left over for spending or saving after paying legally required deductions. Legally required deductions include taxes, Social Security, unemployment insurance, and workers’ compensation.
However, in the case of child support and alimony, the law allows the garnishment of up to 50% of your disposable earnings, if you are supporting a current spouse or child. If you are not supporting a family, the garnishment may reach 60%. You may incur an additional 5% for payments 12 weeks past due.
Additional wage garnishment rules include:
- Federal agencies or their contracted collection agencies may garnish up to 15% of disposable earnings to repay defaulted debts owed the U.S. government.
- The Department of Education may garnish up to 10% of disposable earnings to repay defaulted federal student loans.
States frequently have different wage garnishment limits. Where the state limit differs from the federal limit, the one that results in a lower garnishment amount is used.
Exemptions to Wage Garnishment
In some cases, you may be able to avoid wage garnishment. Wage garnishment exemptions may be granted if:
- You negotiate a repayment plan with your creditor
- You file an exemption form and include a financial disclosure statement explaining you are exempt due to low income (poverty level with no assets), then file it with the clerk of the court
- Your income is exempt (i.e. Social Security, SSI, veteran’s benefits, civil service retirement pension)
- You file for bankruptcy (except in the case of child support, alimony, and back taxes)
For more questions about wage garnishment, the U.S. Department of Labor, Wage and Hour Division, regulates wage garnishments and the associated laws.