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How does Wage Garnishment Work?

How does Wage Garnishment Work?

A wage garnishment is a legal procedure which involves an obligatory payment of a debt, by an individual’s earnings which are withheld automatically. Basically, garnishment refers to a legal summon or warning by the court concerning the attachment of a property to satisfy a debt. And in relation to wages, it is deducting of money from an employer’s salary by the order of court, until the entire debt amount is paid off. 

How does it works

Garnishment is regulated by statutes, and is usually reserved for the creditor who has obtained a judgment, or court order, against the debtor. Often, wage garnishments are given out when a person is negligent on;

  • Child Support
  • Spousal Support
  • Taxes
  • Student Loans
  • Credit Card Bills
  • Medical Bills
  • Any other debt, which he failed to pay

In case of a default, a wage garnishment can be implemented to automatically subtract money owed from his or her payroll without his or her consent. But, the creditor must file a lawsuit against the debtor, so that the court can order garnishment.

After winning a judgment, the creditor must provide a copy of the court order, as well as wage garnishment documents for their jurisdiction, to the debtor’s employer. The employer must then notify the employee of the garnishment.

How is the amount calculated?

The Consumer Credit Protection Act stipulates the amount of income that can be garnished from an individual's wage. The federal garnishment limit is 25 percent of an individual’s disposable income, or whatever amount of the individual’s income exceeds 30 times the current minimum wage. 

Disposable income is the amount of income that is left after mandatory tax deductions, such as federal, state and local taxes and social security deductions. This does not take into account the person’s rent, personal expenses, or other financial needs. 

Additional Laws related to garnishment

The wage garnishment laws not only limits the amount of the creditor which he can take from the person’s wages but it also prohibits  the employers from firing an employee because of a single wage garnishment order. However, if the employer receives wage garnishment orders from more than one creditor, the employee may be legally fired. Illegally firing an individual due to a wage garnishment can result in the employer facing federal criminal charges, the penalty for which is imprisonment of up to one year, and a large fine.

Exceptions to Wage Garnishments

The limits set by the Consumer Credit Protection act in relation to the garnishment of wages, do not apply to unpaid tax debt, child support, bankruptcy orders, student loans or voluntary wage allocations. As per the Laws, the Federal agencies can garnish only up to 15% of an individual’s wage, while the Department of Education can garnish up to 10%. 

In case of an individual, who has no other dependants to support, then only 60% of wages can be garnished for a child support payment. On the other hand, if an individual faces financial hardship due to wage garnishment, they may be eligible to file a claim to reduce the garnishment amount.

Although the Federal and state law regulates the type and amount of paycheck deductions and wage garnishments but when it comes to the garnishment limits, they may differ, and in that case the lower garnishment limit applies.

How to avoid wage garnishment

In order to avoid this situation, it is important that the debtor should respond to the notification and the court hearing, if one is held. He may attend such a hearing with or without an attorney, and bring with him any relative information about the debt, including any attempts made to work out payment arrangements with the creditor. The debtor should also bring to court proof of his income and expenses. 

To sidestep the situation of garnishment, the judges usually order the parties to comply with a payment agreement. However, if the court is inclined to order wage garnishment, the debtor may be able to stop it by appealing to the judge, asking that his file and order be reviewed, or request that an exemption to garnishment be granted. This will require that the debtor show evidence that all of his wages are needed to pay expenses and support himself.

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