Wage Garnishment

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Wage garnishment is a legal procedure by which an individual’s earnings are withheld to repay a creditor. Wage garnishment takes place after the creditor has filed a civil lawsuit, and been granted a judgment against the debtor in court. In some cases, however, a court order is not required. Wage garnishment laws vary by jurisdiction, but most allow creditors to take the action to recoup at least some of the money owed by the debtor.

Wage garnishment is a serious action, and so is typically only used after other attempts to get the debtor to pay have failed. To explore this concept, consider the following wage garnishment definition.

Definition of Wage Garnishment

Noun

  1. A judgment made by a court ordering a portion of a person’s wages to be seized in order to satisfy a debt.

Origin

1300-50            Middle English  garnishen

What is Wage Garnishment

Wage garnishment is a process in which an individual’s employer deducts money from his wages as a result of a court order. The garnished wages are used to satisfy a debt on which the employee has defaulted. Wage garnishment continues until the debt is paid off, or other payment arrangements have been made with the court or the creditor. The most common types of debt that result in wage garnishment include:

  • Child support
  • Student loans
  • Taxes
  • Unpaid court costs
  • Credit card bills
  • Medical bills
  • Any other debts on which a person has defaulted

Wage Garnishment Laws

Each state has very specific wage garnishment laws to protect debtors, while still allowing creditors to recover some of the money owed to them. In the case of child support, back taxes, or student loans, the creditor does not need a court order before issuing a wage garnishment. However, in the event of a default on credit card loans, medical bills, or other types of loans, the creditor must file a lawsuit again the debtor and be granted a judgment before wages can be garnished.

After winning a judgment, the creditor must provide a copy of the court order, as well as wage garnishment documents for their jurisdiction, to the debtor’s employer. The employer must then notify the employee of the garnishment. As of 2015, wage garnishment laws in Pennsylvania, North Carolina, Texas, and South Carolina do not allow any garnishments except for tax purposes, child support, or federal student loans.

How Much Income Can be Taken by Wage Garnishment

State and federal laws protect individuals by placing limits on the amount that can be taken from an employee’s paycheck. The federal garnishment limit is 25 percent of an individual’s disposable income, or whatever amount of the individual’s income exceeds 30 times the current minimum wage. Disposable income is the amount of income that is left after mandatory tax deductions. This does not take into account the person’s rent, personal expenses, or other financial needs.

Most states adhere to the federal threshold, and others place strict regulations on the amounts that can be garnished in specific circumstances. For instance, in Florida, if a person provides more than half their support to a child or other type of dependent, they cannot be garnished in any amount.

Additional Wage Garnishment Protection

In addition to limiting the amount of income a creditor can take from a person’s wages, wage garnishment laws prohibit employers from firing an employee because of a single wage garnishment order. If, however, the employer receives wage garnishment orders from more than one creditor, the employee may be legally fired. Illegally firing an individual due to a wage garnishment can result in the employer facing federal criminal charges, the penalty for which is imprisonment of up to one year, and a large fine.

Multiple Wage Garnishments

Unfortunately, some people find themselves facing multiple wage garnishments at some point. When this occurs, the amount ordered altogether may exceed the person’s disposable income. An employer who discovers, while processing payroll, that the garnished employee does not make enough money to cover multiple garnishments, must satisfy child support payments before all others. If there is no child support, or once it has been satisfied, federal debts must be paid.

If none of the debts is federal in nature, the employer must satisfy state or local tax debts first. In the event all of the garnishments are for credit cards or other unsecured debts, the earliest garnishment must be paid first. Once the garnishment taking priority is paid, the employer may begin issuing payments on other debts.

So, in order of priority, multiple wage garnishments must be paid as follows:

  1. Child Support
  2. Federal debt
  3. State or local tax debt
  4. Earliest credit card or other debt garnishment
  5. All other debts

Example:

Henry owes money to a lot of people, and has already had his wages garnished for child support. When his employer receives another order for garnishment to pay Henry’s IRS taxes, they decide that calculating what to pay and to whom is too much trouble. Henry is fired from his job. The employer has the legal right to fire Henry after receiving a second wage garnishment order. If, however, the employer had fired Henry after receiving the first order, it would have been in the wrong.

IRS Wage Garnishment

When an individual owes money to the IRS, the agency is allowed to garnish his wages without obtaining a court order. This is known as an “attachment,” or” attachment of earnings.” In order for the IRS to place a garnishment against a debtor, it must have assessed the taxes and presented a written Notice and Demand for Payment to the taxpayer. The taxpayer must have then refused to pay the tax debt by the deadline given in the notice. The IRS then sends a final notice to the taxpayer specifying its intent to garnish the taxpayer’s wages.

An IRS wage garnishment can greatly affect a person’s income, as the IRS determines the amount garnished by considering the individual’s dependents, and their standard tax deduction amount. By contrast, state and local tax agencies are required to follow the state’s tax laws regarding how much they can deduct from a debtor’s income.

Wage Garnishment for Child Support

As of 1988, the law requires that all child support orders include an automatic wage withholding order. This applies to child support and family support orders, though not to spousal support, or alimony orders. Once child support has been ordered, many jurisdictions leave whether to send the wage garnishment order to the parent’s employer, or whether that parent can simply make the ordered payments directly.

Once a child support wage garnishment is sent to the individual’s employer, the employer must notify the employee, and begin withholding the specified amount from the individual’s paycheck. In the event the individual is required in the court order to carry medical coverage on the child through his employer, the employer withholds the required amount for such coverage. The amount withheld each pay period depends on certain circumstances:

  • Employee not supporting another dependent not listed on the child support order: 60% of gross wages.
  • Employee supporting another dependent: 50% of gross wages
  • Employee more than 12 weeks behind on child support payments, add an additional 5%

Unlike other debts, which terminate once the debt amount has been paid off, child support garnishments do not end until the order is modified by the court, or the child reaches the age of majority, according to laws of the state.

Wage Garnishment for Student Loans

If an individual defaults on a federal student loan, the U.S. Department of Education can use a third party to collect the debt, and may garnish up to 15 percent of the individual’s wages. As this is a federal loan, it is similar to an IRS debt, and a court order is not required to garnish the debtor’s wages. When the individual defaults on the student loan, the creditor must notify him in writing 30 days before the garnishment is to begin. The creditor must also provide the debtor with the following information:

  • How much is owed
  • How to obtain copies of the loan records
  • Options for payment agreement to avoid wage garnishment
  • How to request a hearing on the matter

How to Stop Wage Garnishment

Avoiding a situation in which a wage garnishment may be issued is always the best course of action, but in the event an individual is facing garnishment, he should respond to the notification and the court hearing if one is held. The debtor may attend such a hearing with or without an attorney, and bring with him any relative information about the debt, including any attempts made to work out payment arrangements with the creditor. The debtor should also bring to court proof of his income and expenses.

It is common for the judge to order the parties to comply with a payment agreement to avoid a garnishment. If the court is inclined to order wage garnishment, the debtor may be able to stop it by appealing to the judge, asking that his file and order be reviewed, or request that an exemption to garnishment be granted. This will require that the debtor show evidence that all of his wages are needed to pay expenses and support himself. While the court as the ability to terminate wage garnishment in certain circumstances, it is less likely to terminate wage garnishment for child support.

Consequences of a Wage Garnishment

Wage garnishment can have lasting consequences, as it lowers the amount of income a debtor brings home, which can affect his ability to pay bills, and to obtain credit in the future. Court-ordered judgments typically remain on the debtor’s record. Often times, if an individual is found to be in default and a judgment is levied against him, he may be responsible for paying the creditor’s court fees in addition to the existing debt.

In addition to seeking reimbursement through wage garnishment, creditors often obtain orders for bank account garnishments as well. This commonly occurs when the debtor does not have a documented steady income. The best way to avoid a wage garnishment is for the debtor to work with the creditor in order to avoid default. Even if they fall behind on payments, most creditors are willing to make payment arrangements.

Related Legal Terms and Issues

  • Authority – The right or power to make decisions, to give orders, or to control something or someone.
  • Civil Lawsuit – A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
  • Creditor – A person or entity to which money is owed by another person or entity.
  • Debtor – A person who is in debt, or under a financial obligation to another.
  • Default – Failure to fulfill an obligation, or to appear in a court of law when summoned.
  • Hearing – A proceeding before the court at which an issue of fact or law is heard, evidence presented, and a decision made.
  • Judgment – A formal decision made by a court in a lawsuit.
  • Jurisdiction – The legal authority to hear legal cases and make judgments; the geographical region of authority to enforce justice.