What is Wage Garnishment?
Wage garnishment is a means for a creditor or agency to collect a debt that is owed by an individual. It could be for past due child support, back taxes, defaulted student loans, a past due credit card, or any other type of monetary judgment filed against an individual by a third party or creditor. A percentage of a debtor’s income would be directly deducted from their pay by their employer to repay the debt until it is satisfied.
Here are five things one should know about garnishing the wages of an individual:
- Each state or locality will have its own set of procedures; but most often the creditor, agency, or individual filing the garnishment will take the paperwork and information of the debtor’s employer to the local sheriff’s office. In turn, the sheriff’s office will serve the garnishment to the employer. The employer is then obligated to deduct the proper amount from the debtor’s paycheck. There might be cases where the garnishment cannot be collected, such as there is already a current garnishment in place that is collecting the full percentage allowed, or the debtor’s only source of income is Social Security, disability, alimony, child support, or retirement.
- There are cases where a debtor will quit his or her job to avoid garnishment; however, upon gaining new employment, the garnishment will follow to the new employer. A debtor may also file bankruptcy to avoid paying the amount owed. This action will cease all contact and collection until the case goes to court. Student loans, back taxes, back child support, or restitution are not forgiven with a bankruptcy and must still be paid.
- The Consumer Credit Protection Act, also known as CCPA, protects a debtor from losing their job as a result of garnishment. In other words, an employer cannot lawfully terminate an employee because of a debt that is being collected through garnishment. There are stipulations to this act; if more than one garnishment is filed with the employer, the debtor is no longer protected by the act.
- Regulations are in place to restrict the amount that can be taken from a debtor’s paycheck. All calculations are based on the employee’s disposable income, meaning after all taxes, Social Security, and retirement accounts are deducted from earnings. For regular garnishments–those not collected by a tax authority or government agency–the cap is the lesser of 25 percent of disposable earnings, or the remaining amount of disposable earnings that is over 30 times the federal minimum wage. Federal debts are usually collected at 15 percent of disposable income, and defaulted student loans at 10 percent.
- If a creditor or agency is willing to work with a debtor, they might come to a payment agreement and end the garnishment. A debtor also has the option to pay the amount off in full before the garnishment would be fulfilled. If this is the case, the creditor or agency would file a satisfaction of judgment with the courts.
As a creditor or government agency filing for a garnishment, you will want to be sure that all laws and regulations are researched and followed. For more information and regulations regarding wage garnishment, visit: http://www.dol.gov/compliance/topics/wages-garnishment.htm.