Q: I have several outstanding debts and I’m starting to worry about wage garnishment. What do I need to know? Is there any way I can protect myself if my wages get garnished?
A: Wage garnishment is the process in which funds are deducted from a person’s salary to pay for their outstanding debts
If you owe lots of money, don’t panic; you can prevent a wage garnishment by working out a manageable payment plan with those you owe money to (your creditors). In the event that your wages are garnished, there are steps you can take to reverse the process.
Read on to have all your questions about wage garnishment answered.
How does the wage garnishment process work?
Unless you owe child support, back taxes or student loans, creditors require a court order to garnish your wages. These creditors can include credit card companies; medical facilities, agencies or hospitals; auto loan creditors and more. To garnish your wages, creditors will have to sue you, win the case against you and receive the court order to move forward with the garnishment process.
Once the court order is in a creditor’s hands, they must send you written notification of the wage garnishment at least 30 days before the garnishment is set to begin. The notice must include the following information:
- Exactly how much money you owe the creditor
- Instructions for how you can obtain a copy of the loan records
- Instructions for entering into a voluntary repayment schedule
- Instructions for requesting a hearing on the planned garnishment
The creditor will then forward a copy of the court order to your employer, who will withhold the garnished amount from your next paycheck. This way, your creditors are getting their due. Unfortunately, that means making do with a skimpier paycheck.
Under federal law, your employer cannot fire you for a wage garnishment. However, if you have multiple garnishments, or a single creditor has garnished your wages for two or more debts, you are no longer protected against retaliation.
How much of my wages can be garnished?
There are strict federal laws limiting the amount of money creditors can skim off your paycheck. By law, creditors of consumer debt can only garnish 25% of your take-home pay, or the amount by which your weekly wages exceed 30 times the minimum wage, whichever amount is lower. Some states have even stricter guidelines and set a lower percentage limit for wage garnishments. When state and federal laws surrounding wage garnishment are in conflict, the law falls on the side that is more favorable to the employee.
Other kinds of debt can have higher maximums for wage garnishment, as detailed below.
What are the most common types of wage garnishment?
The following three wage garnishments are the most common and don’t require a court order:
1.) Child support and alimony
All new or modified child support orders include an automatic wage withholding order.
After the court has ordered you to pay child support, the court or the child’s other parent must send a copy of the order to your employer. The employer is then responsible for garnishing the specified amount from your paycheck and sending it to the child’s other parent. If the court has made you responsible for maintaining health insurance coverage for your child, payments to fund the coverage will be deducted from your paycheck as well.
The amount of money garnished from your earnings for child support varies with circumstance, but it can be as high as 65%.
2.) Defaulted student loans
If you default on your student loan, the U.S. Department of Education, or an agency collecting money on its behalf, can garnish up to 15% of your income.
3.) Back taxes
If you owe money to the IRS, the federal tax agency can help itself to a chunk of your income without obtaining a court order. The percentage of your salary it’ll leave for you varies with the number of dependents you have and the amount of your standard deduction.
To garnish your wages, the IRS is required to send a wage levy notice to your employer, who must provide you with a copy. The notice you receive will include an exemption claim form for you to complete and return.
State tax agencies can also lawfully take a chunk off your salary, though state laws vary regarding how much they can collect.
Can I protest a wage garnishment?
There is always a course of action that’s open to you when you’re the subject of wage garnishment. To protest a wage garnishment, you’ll need to file papers with the court for a hearing date. At your scheduled hearing, you can then present evidence demonstrating that you need more of your paycheck to pay your expenses or that you qualify for an exemption. The judge will then decide to terminate the garnishment or leave it in effect.
Of course, it’s best to avoid having your wages threatened by garnishment in the first place. Once a creditor wins a lawsuit against you, judges tend to be unsympathetic and getting a garnishment lifted can be difficult.
If you’re in over your head with debt, we can help! Call, click or stop by Destinations Credit Union to talk about our debt counseling services and more. We have recently opened an Operation HOPE Inside office at our Parkville location. The HOPE Inside model, created by financial dignity nonprofit Operation HOPE, provides no-cost one-on-one financial literacy coaching, workshops, and education programming to participants through the support of financial and corporate partners. Destinations is the first credit union in the country to offer this service. Credit and Money Management, a core program of the HOPE Inside adult offering, is provided at this location. The Credit and Money Management Program is designed to transform disabling financial mindsets—teaching people the language of money, how to navigate credit, and make better decisions with the money they have.
Your Turn: Have you ever been the subject of a wage garnishment? Share your experience with us in the comments!