Wage garnishments occur when a creditor obtains a court order to garnish the wages of a debtor for the repayment of a debt. Common debts which are paid back through wage garnishments include:
- Auto loans;
- Credit cards; and
- Home loans.
In a case with a large amount of debt, the court will apply wage garnishment laws in order to force workers to repay some of the debt so that they do not further increase what they already owe and force themselves into bankruptcy.
In a wage garnishment, a court orders a defendant’s employer to take a portion from their employee’s paycheck and to send that garnishment to the court or to an intermediary agency that processes debt payments. Once the garnishment is ordered, the court will send a notice to the employer to begin garnishing the employee’s wages. Typically, it is up to the employer to calculate the amount to be paid, which is usually taken out weekly.
A court order is required for a creditor to be allowed to garnish wages. This applies except in the following circumstances:
This means that every other debt, such as credit card debt, requires a court order in order to garnish an individual’s wages. It is important to note that any deductions for child support will only occur once it has been established that the individual owes child support and they are late on their payments.
It is important to note that if an individual believes they may owe child support but a court order for child support has not yet been issued, the individual does not yet owe child support. Child support should not be garnished from an employee’s wages until the court order is issued.
Although creditors can obtain a court order to garnish a debtor’s wages, there are limitations on how much of the employee’s income can be garnished and the type of income which is subject to garnishment. Pursuant to federal laws, a wage garnishment can not exceed 25% of a debtor’s disposable income, or after-tax earnings, or the federal minimum wage multiplied by 30.
In addition, a state can further limit the amount which can be garnished. For example, if 15% of an individual’s income is being deducted for student loans and another wage garnishment is ordered, only 10% of the individual’s income may be taken to satisfy the second debt. Overall, the garnishment is limited so that an employee will still have income to live on.
In child support liens, however, up to 50% of a debtor’s earnings may be subject to wage garnishment. Typically, a wage deduction is automatic with a new child support order.
If an individual owes unpaid child support, the court may order a specific wage garnishment in order to collect the debt. For example, if an individual is ordered to pay child support but does not have a job, they may still owe the payments which were missed while being unemployed. If the individual gets a job a few months later, the court can order garnishment for those months of missed payments.
What is Income that Creditors Cannot Garnish?
While a creditor can garnish wages from most forms of income with or without a court order, depending on the type of debt, a debtor is not permitted to garnish from the following:
A creditor is permitted to garnish wages from protected sources of income if the garnishment is for overdue income taxes or child support:
It is important to note that this does not include:
- Bonuses;
- Commissions;
- Severance pay; and
- Investment-related income.
What are Creditor Violations of Debtor Rights?
If a creditor is found to be in violation of any debtor rights, the reinstatement of the debtor’s garnished wages may be ordered. In serious cases, a creditor may face criminal prosecution with the possibility of imprisonment and criminal fines.
What Should I Do to Stop My Wages from Being Garnished Immediately?
If an individual has been ordered to have their wages garnished, it may be difficult to avoid this type of judgment, but the individual can object to it. Depending on the type of debt the creditor is attempting to collect, an individual may explore pre-hearing options and hearing options.
Prior to an individual’s case going to court, they can try to negotiate with the creditor for a payment plan. If the individual and the creditor can agree to a plan, the creditor can put a stop to the garnishment of wages.
If an individual is facing financial hardship, they may file an objection to the wage garnishment and claim exemption. The individual must be able to prove that they are unable to cover their basic living costs if their income was lowered.
If they are successful, the garnishment will be limited and the amount taken out will be reduced. Typically, exemptions are already in place for income that is received from Social Security, alimony, and retirement.
What about Filing for Bankruptcy as a Last Resort?
Bankruptcy can be an option for individuals with substantial debt. Once they file for bankruptcy, the court will issue a stay which stops most wage garnishments. In most cases, child support is an exception to this rule.
If the individual’s bankruptcy is successful, their debt may be released. Some bankruptcies require debtors to repay old debts. It is essential to speak with an attorney prior to attempting to file for any type of bankruptcy.
Can an Employer Fire Me due to a Wage Garnishment?
It is possible for an employer to terminate an employee because of a wage garnishment. This is only permitted if they accumulate more debt which results in a second wage garnishment.
Title II of the Consumer Credit Protection Act prevents an employee from being terminated for a wage garnishment, but only if they do not keep accumulating more debt.
Are There Consequences for Employers Who Do not Comply with a Garnishment Order?
An employer who does not comply with a wage garnishment order may face court-ordered fines. In serious cases, the employer may face criminal charges and jail time.
These consequences may also apply for an employer who fails to pay the correct amount of garnished wages or for deducting a higher amount of wages without the defendant’s knowledge or consent.
If an employer terminates an employee due to a wage garnishment which is protected under Title II of the Consumer Credit Protection Act, as noted above, the employer may be fined or face imprisonment for up to one year.
Do I Need a Lawyer?
Yes, it is essential to have the help of a financial lawyer for any wage garnishment issues you may be facing. If your wages are being garnished, it is important to consult with an attorney as soon as possible.
Your attorney can review your case, advise you of your rights, and discuss your obligations and best options going forward. It is essential to seek the advice of an attorney as soon as you can, before the garnishment has a further negative effect on your financial situation, such as having to file for bankruptcy or a negative impact on your credit score.
