Wage garnishment is a process used by creditors to take a portion of your paycheck after obtaining a court judgment for money owed. Generally, creditors only use this process as last resort when negotiations or other demands for payment of a debt have been exhausted.
Some states only allow wage garnishment for child or spousal support or for overdue tax obligations.
When All Else Fails
Before a wage garnishment goes into effect, a creditor will use collection letters and phone calls to get the debtor to pay up. Often, a creditor will offer to reduce the amount owed if a lump sum payment can be made.
If that fails, a creditor, usually a credit card company, will sell its debt to a collection agency, which will contact the debtor numerous times. If the debt is large enough, the creditor may finally notify the debtor of pending legal action before it files and serves a lawsuit.
Service of the Garnishment
The debtor’s employer is served with the garnishment order and up to 25 percent of the debtor’s paycheck may be withheld for payment to the creditor. The debtor does have recourse, however, by challenging the garnishment within a set time. Possible defenses are that the wages are exempt because of its source or that the amount being garnished is imposing a severe financial hardship and should be reduced.
How Much Can be Garnished?
Federal law limits the percentage of a debtor’s disposable earnings that can be garnished to 25 percent, or the amount by which the debtor’s weekly wage exceeds 30 percent of the federal hourly minimum wage, or whichever amount is lower. Also, a state’s maximum limit may be less than the federal limit and takes precedence.
If the state or county is garnishing a debtor’s wages to collect at least 12 weeks in arrearages for child or spousal support, the amount garnished can be up to 50 or 60 percent if the debtor is not supporting a child or spouse and the state’s law does not impose a lower limit.
The debtor’s employer is required to notify the employee of the garnishment and to obey the order or face a fine or even imprisonment in extreme cases. It is a violation of law to allow more funds to be garnished than either state or federal law allows. If the employer fires an employee over a wage garnishment, there are federal penalties that include a fine of up to $1,000 and one year in jail, but some states will allow such action if the employee has undergone multiple garnishments.