Creditors have several legal options for pursuing debts that you owe, one of which is sometimes wage garnishment. Debt collection often begins with nonstop telephone calls and threatening letters. Creditors may turn accounts over to debt collectors, who can be aggressive when collecting bad debts. Creditors and debt collectors report the accounts on your credit reports, which can make obtaining loans and housing much more difficult by lowering your credit score
One legal resource that your creditors might take is wage garnishment. Under wage garnishment laws, your creditor could seize a portion of your income to repay the debt.
What Is Wage Garnishment?
Many creditors use wage garnishment to collect debts, including Midland Funding
and other debt collectors. Wage garnishment is the legal process of seizing a portion of your earnings to pay a debt. The court may order wage garnishment for child support, taxes, student loans, medical bills, credit card debts, and other outstanding debts.
A creditor cannot legally seize part of your earnings without a court order. However, once the creditor has a wage garnishment order, your employer is legally required to withhold a portion of your wages to pay the debt.
What Is the Wage Garnishment Process?
Creditors cannot immediately seize your income for most types of debts. Instead, they must obtain a judgment before they can begin garnishing your wages. Therefore, the creditor must file a debt collection lawsuit.
The laws vary by state, but all states require that the creditor serves you notice of the lawsuit. You have a specific deadline for responding to the lawsuit.
If you do not respond to the lawsuit, the creditor asks the court to grant a default judgment. A default judgment (personal judgment) is a court order stating you owe the creditor a specific amount of money. The court records the personal judgment in the county records.
After receiving a judgment, the creditor can request the court issue a wage garnishment order. The creditor sends the order to your employer. Your employer must withhold a portion of your wages each pay period to send to the creditor. Your employer continues withholding a portion of your income until the debt is paid in full.
IMPORTANT NOTE: Some creditors do not need to obtain a judgment before they can garnish your wages.
The government can garnish up to 15% of your disposable income for federal student loan debt
without a court order. Likewise, the Internal Revenue Service does not need a court order to garnish your wages for back taxes. Also, child support orders generally contain wage withholding orders, so there is no need to obtain an additional order to garnish wages for child support payments.
State laws vary regarding wage garnishment. Most states allow wage garnishments, but a few states do not allow creditors to obtain wage garnishment orders for personal judgments. Therefore, you should always check with a bankruptcy lawyer near you about the wage garnishment laws in your state.
How Much Can A Creditor Garnish From My Paycheck?
Federal law limits the amount a creditor can garnish from your paycheck. Title III The Consumer Credit Protection Act (CCPA
) states that wage garnishments cannot equal the lesser of the following two amounts:
- 25% of your disposable earnings; OR,
- The amount of your disposable earnings that exceeds an amount equal to 30 times the federal minimum wage.
Therefore, your income cannot be garnished if your weekly disposable income is less than $217.50 (federal minimum wage of $7.25 x 30). You do not have any disposable income that is subject to wage garnishment.
However, if your disposal earnings are more than $217.50 but less than $290, the creditor can garnish the amount above $217.50. Disposable earnings greater than $290 may be garnished at a maximum rate of 25%.
Some states have laws regarding wage garnishments within their state. For example, with wage garnishment in California
, the creditor can take, "25% of disposable earnings for the week; OR, 50% of the amount between the applicable minimum wage and the employee’s disposable income for that week". If the state law differs from federal law for wage garnishment amounts, the lower amount is used when calculating the garnishment amount.
What Are My Disposable Earnings?
Disposable earnings is the amount of money you have left in your paycheck after legally required deductions are withheld.
Legally required deductions include local, state, and federal taxes. It also includes your share of Medicaid, Social Security, and Unemployment Insurance tax. Contributions to mandatory retirement accounts are deducted from gross wages to calculate calculating disposable income.
However, deductions that are not required by law are not used to calculate your disposable income. Therefore, deductions for health insurance, union dues, retirement plans, and other voluntary deductions would not be deducted from your gross wages to determine your net disposable income.
What Types of Income Can Be Garnished?
Creditors may garnish any income you receive as compensation paid for personal services. That includes hourly wages, overtime pay, salaries, commissions, and bonuses. It also includes payments from retirement, pension, profit sharing, workers’ compensation, severance pay, and most other income related to employment.
Social Security income
is generally exempt from wage garnishment for personal judgments. However, Social Security can be garnished for unpaid federal taxes, child support, alimony, and court-ordered restitution.
The creditor could ask that the court issue an order to freeze your bank account to collect a debt (bank account garnishment
). If your Social Security income is directly deposited into the account, you would need to prove that the amount in the account is from exempt Social Security income to stop the garnishment.
How Do You Stop Wage Garnishment?
You may be living check to check and cannot afford wage garnishment amounts to be removed from your pay check.
Fortunately, there are ways to stop wage garnishment
. Paying your living expenses and other bills can be nearly impossible when your wages are garnished. However, there are a few ways you can try to stop the wage garnishment.
File an Objection to the Wage Garnishment
You can object to the wage garnishment. When you receive the garnishment documents, there should be instructions about how to object to the garnishment, including filing deadlines. If not, contact the clerk of court immediately. You might also want to contact a lawyer for help.
Your objection must contain the grounds for stopping the wage garnishment. You are not arguing whether you owe the debt. The time to argue whether you owe the debt was during the debt collection lawsuit. Now, you are arguing that your wages should not be garnished because of an exemption.
For example, you allege that you are exempt from garnishment because your income is from Social Security or domestic support payments. You might argue that your disposable income is below the limit for a garnishment. Some states may have other exemption laws that could apply in your case.
Negotiate the Wage Garnishment
You could try to negotiate a wage garnishment
. You might be able to pay a lump sum payment to the creditor instead of the wage garnishment. The creditor may be willing to accept an amount lower than the total judgment if you pay the amount in one lump sum right now.
If the wage garnishment has been going on for some time, you could also ask the creditor about paying off the wage garnishment early. The creditor might discount the amount owed if you could pay off the wage garnishment early
instead of paying the debt through ongoing wage garnishment.
Another option is to file bankruptcy to stop wage garnishment. Creditors cannot continue to garnish your wages for dischargeable debts once you file for bankruptcy relief. Therefore, filing a Chapter 7 or Chapter 13 petition stops wage garnishment.
However, suppose the wage garnishment is for a debt that is not dischargeable in bankruptcy (i.e. child support, restitution, alimony, student loans, most taxes). In that case, the wage garnishment could begin again after your Chapter 7 case closes. On the other hand, if you file Chapter 13, your Chapter 13 plan should pay the debt in full, so you would not need to worry about a wage garnishment after you complete the Chapter 13 plan.
What If I Am Judgment Proof?
“Judgment proof” generally refers to someone who does not have non-exempt assets to pay a debt. In other words, if a creditor obtains a personal judgment, the person does not have any assets that the creditor could seize to collect the debt. Many states exempt specific property from being seized to pay debts, or the state may exempt a portion of the person’s equity in the property from garnishment.
However, that does not mean the person’s income could not be garnished. If their income is above the minimum amount for wage garnishment, the court could still issue a wage garnishment order for a personal judgment.
Wage Garnishment By State
Each state has its own laws and regulations concerning wage garnishment. See the state wage garnishment articles below to see information from your state.
FAQs About Wage Garnishment
Below are answers to other frequently asked questions about wage garnishments.
When Does a Garnishment Start?
State laws vary regarding the notice that creditors must give for a wage garnishment to start. In many cases, an employer must comply with the wage garnishment order as soon as it is received. Therefore, wage garnishment should begin with the pay period following your employer’s receipt of the order.
However, a judgment could enter a specific date in the order for the employer to begin withholding funds from your paycheck. The court could also request additional information from your employer, which might delay the garnishment for a month or longer.
How Long Does Garnishment Last?
A wage garnishment continues until the debt is paid in full or your wages fall below the garnishment level. If your wages fall below the minimum garnishment level, you may need to petition the court to stop the wage garnishment. Your state could have a statute of limitations for wage garnishments. However, if the debt is not paid before the statute of limitations expires, the law could allow the creditor to have it renewed.
How Do I Check My Wage Garnishment Balance?
In some states, creditors must provide you and/or your employer with a periodic accounting of the debt showing the amount paid and the balance owed on the judgment. Most states allow creditors to collect interest on judgment amounts. Therefore, the interest continues to accrue until the debt is paid in full.
If you do not receive an accounting, ask your employer if it received an accounting from the creditor. If not, contact the creditor or its attorney. Send a written request demanding an accounting of all amounts paid and the balance owed on the judgment subject to the wage garnishment.
What Happens After Wage Garnishment is Paid?
Once the debt is paid in full, the creditor should notify your employer to stop withholding money from your wages. The creditor should also file a satisfaction of judgment with the clerk of court.
Keep an accounting of the amount of money withheld from your paycheck. It helps you know when the judgment should be paid in full and the wage garnishment is paid
Creditors may not automatically stop wage garnishments immediately upon receiving full payment. Fighting to get money back from a creditor can be time-consuming and expensive. Therefore, it is better to keep a close watch on the wage garnishment so you can take immediate action if the creditor does not stop garnishing your wages after the debt is paid in full.
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