Wage Garnishments in Colorado

Having your wages garnished means you’ll see a large chunk of your paycheck is missing. You have bills to pay, but if your wages are garnished, this can be difficult. What will you do? That’s what this article is about. We’ll discuss who can garnish your wages and what steps they have to take in the Centennial State. We’ll also look at how much a creditor can take from your paycheck, what exemptions you can claim, and how you can stop a garnishment.

What Is Wage Garnishment?

Wage garnishment is when a creditor takes money out of your paycheck to address a past-due debt. They can keep garnishing your wages until your debt is paid in full. With consumer debts like credit cards, medical bills, and personal loans, the creditor has to sue you and get a judgment against you before they can garnish your paycheck. The judge will issue a court order called a writ of garnishment, requiring your employer to take money out of your paycheck and send it to the creditor or the court. If your employer fails to send the money, it will have to answer to the court.

The amount of your wages that can be withheld for garnishment is limited by state law.

Who Can Garnish My Wages in Colorado?

Consumer creditors like credit card companies and collection agencies can garnish your wages if they have a court judgment. There are other types of creditors that may not need to win a lawsuit before they garnish. These creditors include taxing authorities (federal, state, or municipal), federal student loan servicers, and creditors for domestic support obligations such as child support or alimony. There are different limits and rules for these types of creditors.

Colorado’s garnishment law regulating consumer creditors recently changed. The changes will help working Coloradans keep more money in their paychecks. The rest of this article will focus on consumer credit garnishments.

The Colorado Wage Garnishment Process

Creditors can’t just start garnishing your paycheck. They have to follow the proper steps.

1. The creditor brings a lawsuit. Consumer creditors must sue you before they can get a garnishment order. The lawsuit will be served on you by a sheriff’s deputy or a private process server. Under special circumstances, the service may come by mail or by publication in a local newspaper. 

2. You have 21 days to answer the lawsuit unless you’re sued in small claims court. You need to file your answer with the court within 21 days. If you’re sued in small claims court, you need to show up on the trial date shown on the summons. You can prepare for your trial by gathering evidence.

If you fail to answer your lawsuit within the time allowed or don’t show up for your small claims court date, the consumer creditor can get a default judgment against you. This is the same as losing at a trial. If you do follow the rules and show up for a trial, your chances of winning are probably better than you think. 

1. You’ll have to answer questions. If the consumer creditor wins a judgment at trial or gets a default judgment, they’re called a judgment creditor and you’re called a judgment debtor. The judgment creditor will send you written questions to get information on your employer and any assets you own. You’re required to answer these questions and return them within 14 days. Once the judgment creditor has this information, they know where to serve a garnishment order. 

2. The garnishment will be served on your employer (the garnishee). Unless you object, your employer will start garnishing your paycheck. You have 14 days to object. If you do object, the court will set a hearing within 14 days for you to present your case. You can’t contest the judgment at this hearing, but you can contest the garnishment amount. You might contents the amount, for example, if some of your income is exempt from garnishment.

3. The judgment creditor has six months to collect garnishment payments before the writ of garnishment expires. If the full debt isn’t paid within six months, the creditor can renew the garnishment every six months until the debt is paid in full.

How Much of My Paycheck Can Be Taken by Wage Garnishment?

Colorado’s wage garnishment law changed on October 1, 2020. Under the new Colorado law, garnishment is restricted to the lesser of:

• 20% of your weekly disposable earnings, or 

• The amount your disposable earnings exceeds 40 times the Colorado minimum wage or the federal minimum wage, whichever is higher. Right now the Colorado minimum wage is $12.32/hour and the federal minimum wage is $7.25/hour. So you’d use Colorado’s minimum wage in this calculation: 40 times $12.32 is $492.80.

Wages are garnished from your disposable income. This is what’s left in your paycheck after legally required deductions like income taxes are taken out. Other deductions, not required by law, like voluntary 401(k) contributions, health insurance, or union dues aren’t deducted when determining disposable earnings. 

To see how these numbers pencil out, let’s say your weekly disposable income is $500. 

• 20% of $500 is $100.

• $500 - $492.80 (CO minimum wage x 40) is $7.20.

Since $7.20 is less than $100, creditors with a valid court judgment can only garnish $7.20 a week from your paycheck. 

The new law covers writs of garnishment issued on or after October 1, 2020. Under normal circumstances, these writs expire every six months, so none of those would be in effect in October 2021. But due to COVID-19 relief measures, some wage garnishments were suspended. This has created a legal gray area for suspended garnishments that are reinstated under the new law. You may need to consult with an experienced Colorado attorney if you took advantage of the COVID relief measures to have your garnishment suspended.

How To Stop a Garnishment in Colorado

To stop a wage garnishment in the Centennial State, you have a few options. Under the law that took effect in October 2020, you’re allowed to petition the Colorado court to lower or suspend the garnishment. You can also stop the garnishment by paying it off, though this isn’t possible for most people in this position. 

You can also use federal bankruptcy laws to stop wage garnishments. Choosing to file bankruptcy will provide debt relief for all your debts, not just the garnishment. When you file bankruptcy, the court grants an automatic stay. This stops debt collection actions including garnishments. 

If you file a Chapter 7 bankruptcy, your case will be over in four to six months and the debt along with the judgment will usually be eliminated. Many people think creditors can take things from you when you file bankruptcy. The truth is very few people lose anything when they file bankruptcy because you have bankruptcy exemptions to protect you. Usually, these exemptions are enough to cover all your property.

If you have a simple Chapter 7 bankruptcy case, Upsolve has a free tool that makes it easy to file bankruptcy on your own without hiring an attorney. Attorneys fees can be very expensive and especially difficult for you to pay if you’re being garnished. For complex Chapter 7 bankruptcies and Chapter 13 bankruptcies, you’ll need to consult with a local bankruptcy attorney. 

Are There Any Resources for People Facing Wage Garnishment in Colorado?

If you need help with a wage garnishment case, you can contact one of Colorado’s legal aid nonprofits like Colorado Legal Services (CLS). CLS helps low-income Coloradans with issues like garnishment and bankruptcy. You can also visit:

• The Colorado Judicial Branch’s Self-Help section

• The Colorado Bankruptcy Clinic

• The Denver Bar Association's Metro Volunteer Lawyers

• The American Bar Association’s free legal help page

• Upsolve.org