Wage garnishment is certainly something to fear. If collectors garnish your wages, they take pay directly from your employer, before you ever receive your paycheck. Collectors or other creditors can garnish up to 60% of your income depending on the type of debt. The good news is that garnishment isnít something a business can do without getting permission from the court. And, you should have ample time to take care of your debt before garnishment happens.
What Leads to Garnishment
Wage garnishment is usually the last resort a creditor takes to collect from you. Before garnishment happens, the creditor must have sued you and won a judgment against you. Even then, the creditor has to get separate permission from the court to garnish your wages to get the judgment paid.
By the time a creditor sues you over a debt, itís likely become seriously delinquent and the creditor has exhausted other collection efforts. Essentially, the creditor has tried everything else to get you to pay up and theyíve failed.
Third-party debt collectors are not allowed to threaten to garnish your wages unless they have the authority to and intention of doing that. Debt collectors who make these kinds of threats are violating the Fair Debt Collection Practices Act.
Maximum Garnishment Amounts
The maximum garnishment amount is based on your ďdisposable earningsĒ as defined by the CCPA. Disposable income is basically your income after legally required deductions are taken. That includes taxes, unemployment insurance, social security, and legally required retirement deductions.
If you make more than $290 per week, then 25% of your disposable earnings will be garnished. If you make between $217.50 and $290, then the amount over $217.50 is subject to garnishment. And if you make less than $217.50, then your wages canít be garnished.
An exception is made for court-ordered child support or alimony. Up to 50% of your wages can be garnished if you have another spouse or child to support. Otherwise, up to 60% of your wages can be garnished.
Exceptions to Garnishment Rules
Certain types of income cannot be garnished for consumer debts. This includes social security benefits, unemployment insurance, workersí compensation, or disability, health insurance, or relocation benefits.
These garnishment laws do not apply to Federal taxes, state taxes, or certain bankruptcy court orders. Garnishment law also doesnít apply to voluntary wage assignments where youíve agreed to have your wages garnishment for repayment of your debt.
Garnishment isnít the only way that creditors can forcibly take what you owe. They can also levy your bank account, with permission from the court, of course. With a bank levy, the creditor can deduct the debt from your bank account. Unfortunately, you wonít have access to the account until the levy is lifted. And if you have ungarnishable amounts in your account, like Social Security benefits, youíll have to get the court to release these funds.
Job Security Following a Garnishment
Thankfully, your job is safe as long as you only have wage garnishment for one debt. The Consumer Credit Protection Act prohibits your employer from firing you if your earnings are garnished for one debt. But, if your wages are being garnished for multiple debts, the law is no longer on your side.
If one creditor is already garnishing your wages for the maximum amount, then you probably donít have to worry about a second garnishment. Unless the second garnishment is one of those debts thatís exempt from garnishment rules, e.g. taxes or child support.
Can You Stop a Garnishment?
Stopping a wage garnishment can be difficult. You can try to make a deal with the creditor outside the court, but the creditor may be unwilling to entertain your offer since you didnít respond to their previous collection efforts. If the wage garnishment makes it hard for you to live and eat, the court may be willing to reduce the garnishment amount. Finally, you can file bankruptcy to stop the garnishment and if the debt is discharged, youíll no longer owe it.
Sources: Nolo.com, U.S. Department of Labor