In a NutshellIf you have unresolved debt, creditors can seek a court order to have your employer withhold some of your earnings to pay it off. The amount of money they’ll withhold depends on the type of debt you have. There are some steps you can take if you find yourself facing wage garnishment.
If you’re behind on paying off your debts, you may be in danger of losing some of your paycheck.
If you owe money for child support or alimony, credit card debt, student loans or back taxes, your creditors could garnish your wages via court order. Wage garnishment is a legal process in which your employer withholds a portion of your income to pay off your debts.
While the amount of money that can be withheld depends on the type of debt you owe, your employer can’t hold back 100% of your paycheck. But there are steps you can take if you find yourself facing a wage garnishment order.
- What is wage garnishment?
- Types of wage garnishment
- How much will your wages be garnished?
- What to do when your wages are garnished
What is wage garnishment?
Wage garnishment is a legal procedure that requires an employer to withhold a portion of an employee’s income to repay a debt. Wage garnishment is usually ordered by a court, though some debts owed to the federal government, including to the IRS, may trigger a garnishment even without a court order, also called a judgment.
If a court determines you’re eligible for wage garnishment, it’ll set a wage assignment that tells your employer how much money to deduct from each paycheck. Once the money is withheld, it’s sent to a third party that distributes the money to the creditor (in the case of loans) or the parent or spouse (in the case of child support or alimony). Wage garnishment stops when you have paid off your debt.
Federal benefits, like Social Security, veterans’ benefits, federal student aid and disability benefits are typically exempt from garnishment if received via direct deposit, though some of them may be garnished if your debt is for federal taxes, a federal student loan or child support.
Types of wage garnishment
The type of debt you owe determines how much of your income can be garnished and may come with other circumstances, like whether a court order is required for your employer to withhold part of your paycheck. Here are some common types of wage garnishment.
- Child support and alimony — Missed payments for child support or alimony are one common reason for wage garnishment. Child support is always deducted first if you have more than one wage assignment in place.
- Credit cards and other loans — Consumer debt, like money owed on credit cards, medical bills and personal loans, is subject to wage garnishment.
- Federal student loans — If you default on a federal student loan, the Department of Education has the authority to garnish some of your disposable earnings to repay the debt.
- Back taxes — If you’re behind on paying your federal taxes, the IRS can garnish your income. This is also called an IRS wage levy.
How much will your wages be garnished?
The Consumer Credit Protection Act, or CCPA, limits the amount of money your employer can withhold from your paycheck to a portion of your “disposable earnings,” or the amount of earnings left after deductions like taxes, Social Security, Medicare and legally required retirement contributions. The amount of the wage garnishment also depends on the reason for the withholding.
Credit cards and other loans
For ordinary garnishments like consumer debt, the amount withheld per week will either be 25% of your disposable earnings, or the amount of disposable earnings that’s greater than 30 times the minimum wage — whichever is less.
For example, if your weekly disposable earnings are less than $217.50 (minimum wage of $7.25 x 30), no wages can be garnished. If your weekly earnings equal $290 ($7.25 x 40, which is full-time pay for the week) or higher, then 25% can be garnished. If your earnings land between those two numbers, only the difference ($290 – $217.50 = $72.50) can be garnished.
Federal student loans
If you defaulted on a federal student loan, up to 15% of your disposable earnings may be garnished by the Department of Education.
Someone ordered to pay spousal or child support may have between 50% and 60% of their disposable earnings withheld.
If the IRS is garnishing your wages because you owe back taxes, the amount will depend on your filing status, the number of dependents you claim and possibly other factors.
Other things to know
You may also be responsible for paying interest on your late/unpaid payments or other fees, like collection fees. Each state also may have different procedures, including exemptions from garnishment and the process for collecting state taxes that are in arrears.
In general, if a state law disagrees with the federal law, the law that is more restrictive (in other words, the law that allows you to keep more of your money) is enforced.
What to do when your wages are garnished
If you’re facing wage garnishment, you may want to reach out to a local consumer law attorney for help. Here are some other things to do if you’ve received a garnishment order.
- Validate the debt claim — Carefully read the judgment and verify that the information is accurate. You can contact the creditor or collection agency and ask for proof of the debt.
- Explore your options — If possible, look into debt consolidation, debt settlement or making a new budget to work with the wages being garnished.
- Work out a payment plan — Contact your creditor to see if you can agree on a payment plan.
- Accept the garnishment — You can accept the garnishment and allow the money to be taken out of your paycheck until your debt obligation is fulfilled.
- Try to fight it — You can also fight a garnishment order, which may involve requesting a court hearing. Check your garnishment notice for instructions for how to petition the garnishment.
Garnishment proceedings are complex and don’t happen right away — it can take at least six months of missed payments to trigger a court order. So even if you’re falling behind on paying your debt, you may still have an opportunity to get back on track and avoid a wage garnishment situation.
If you are facing garnishment or are having trouble keeping up with a payment schedule, you might want to enroll in a debt-relief or credit-counseling program. These services can help you organize your finances, establish a budget and create a plan to regain financial security.