I Paid Off My Wage Garnishment — Now What?

Wage garnishment can happen to anyone. Unexpected medical bills or car repairs could have a huge impact on your financial situation and your ability to pay your debt. If you default on your debts, your creditors can take you to court and get an order for wage garnishment, which allows them to withhold money from your paycheck or bank account. Once all the debts are paid, you should speak with your employer or check your bank account to make sure money is no longer being withheld and sent to your creditors. 

I Paid Off My Wage Garnishment — Now What?

Paying off a debt through wage garnishment is a major accomplishment. It’s not easy to manage your finances when a portion of your paycheck or bank account is being taken. But once your debt is fully paid, it’s important to make sure the garnishment stops and your paycheck or bank account returns to normal. 

Here’s what to do next:

• Confirm that the debt is fully paid: Confirm with the creditor or collection agency that your debt has been fully paid. Request written proof, such as a release of garnishment letter or a statement showing a $0 balance. This document can help if there are disputes or delays in stopping the garnishment.

• Make sure the garnishment stops: Once the debt is paid off, the creditor is responsible for notifying your employer (if your wages were garnished) or your bank (if your account was levied) to stop the garnishment. However, mistakes can happen, and it’s important to double-check.

  • If your wages were garnished: Contact your employer’s payroll department to ensure they’ve received the notice to stop withholding money from your paycheck. If they haven’t, you may need to contact the creditor or the court to verify that the garnishment has been lifted.

  • If your bank account was levied: Regularly check your bank account to ensure no more funds are being withdrawn. If your bank hasn’t received notification from the creditor or court, you’ll need to follow up with the creditor to make sure they sent the proper paperwork to release the garnishment or levy.

• Monitor your paychecks and accounts: After the garnishment ends, continue monitoring your paychecks or bank account for at least a few pay periods to make sure the garnishment has stopped completely.

• Address any overpayments or errors: If your employer or bank continues to garnish money after the debt is fully paid, you need to act quickly. Contact the creditor and provide proof that the debt has been paid off. If necessary, file a complaint with the court that issued the garnishment. Additionally, if protected funds (like Social Security benefits, unemployment income, or disability benefits) were garnished in error, you may need to go to court to recover the money. These funds are legally exempt from garnishment, and you have the right to get them back.

What Is Wage Garnishment?

Wage garnishment is a legal process that allows creditors to collect unpaid debts directly from your paycheck or bank account. But it doesn’t usually happen automatically. In most cases, the creditor must first take you to court and get a judgment against you. A judgment is a court order that confirms you owe the debt and gives the creditor the legal right to collect it. Once the creditor has this judgment, they become a “judgment creditor” and can pursue garnishment to collect the money you owe.

The rules for wage garnishment vary by state. In some states, the judgment itself includes permission to garnish your wages or bank account. In others, the creditor has to take additional steps to get a separate legal document called a writ of garnishment. This writ is what allows the creditor to start collecting directly from your income or funds.

It’s worth noting that some government creditors, such as the IRS or the Department of Education, can garnish your wages without going to court. This can happen if you have unpaid federal taxes or default on federal student loans. State tax collection agencies may also garnish your wages for unpaid state taxes. While these agencies can bypass the court process, they must still give you notice before starting the garnishment.

Wage Garnishment vs. Bank Levy: Understanding the Difference

Once a creditor has a writ of garnishment, they can collect the debt in two main ways: by taking money from your paycheck or directly from your bank account. If the garnishment order is sent to your employer, your employer will be required to withhold a portion of your disposable income (your earnings after legally required deductions) and send it to the creditor or the court. This process continues until the debt is fully paid or the garnishment order is otherwise stopped.

Alternatively, the creditor may issue a bank levy, which allows them to take funds directly from your bank account. A bank levy is often used when wage garnishment isn’t an option or doesn’t collect enough to satisfy the debt.

It's important to note that federal and state laws limit how much money creditors can take from your wages. These protections ensure you have enough income left to cover essential expenses.

What Income Is Exempt From Wage Garnishment?

Some types of income are completely protected from garnishment. This means creditors can’t legally take these funds to pay off a debt. If you believe your income qualifies for an exemption, you can file paperwork with the court called a claim of exemption or wage garnishment exemption. This paperwork is used to protect specific types of income or property from being garnished. Keep in mind that deadlines to file a claim of exemption are short — some states give you as few as five days to file — so it’s important to act quickly.

Exempt income includes certain benefits and assistance programs that are protected under federal and state laws. For example, Social Security benefits, Supplemental Security Income (SSI), unemployment benefits, and workers’ compensation benefits are typically exempt from garnishment. If all of your income comes from these sources, creditors can’t garnish your wages. These protections exist to ensure that people can still cover essential living expenses, even if they owe money.

How Much of Your Paycheck Can Be Garnished?

Even if your income isn’t fully exempt, there are limits on how much money can be garnished from your paycheck. These limits are set by Title III of the Consumer Credit Protection Act (CCPA), a federal law designed to protect employees from losing too much of their earnings to garnishments. The U.S. Department of Labor enforces this law.

Under the CCPA, most creditors can only garnish the lesser of:

• 25% of your disposable earnings (your take-home pay after deductions for taxes and other mandatory withholdings), or

• The amount by which your weekly earnings exceed 30 times the federal minimum wage of $7.25 per hour.

This calculation ensures that you’ll have some income left to cover basic living expenses. The exact amount garnished may vary based on how often you’re paid. For example, if you’re paid bi-weekly, the garnishment amount will typically be higher than if you’re paid weekly.

In addition to limiting how much can be garnished, Title III of the CCPA also prohibits employers from firing an employee because of a single wage garnishment. However, this protection doesn’t apply if you have multiple garnishments for different debts.

How Does Wage Garnishment Affect Your Credit?

Wage garnishment doesn’t directly appear on your credit report, so there won’t be a specific line item showing your wages are being withheld. However, the events leading to garnishment — like missed payments, accounts in collections, and lawsuits — can harm your credit score.

Most garnishments happen because you’ve fallen behind on debts like credit cards, loans, or medical bills. Missed payments are reported to credit bureaus and can significantly lower your credit score. If an account goes to collections or is charged off, this negative mark can stay on your credit report for up to seven years, even after the debt is paid.

Another key part of the garnishment process is the court judgment. To garnish wages, creditors usually need to sue you and win a judgment. While judgments no longer appear on credit reports (since 2017), the debt tied to the lawsuit often causes credit damage before the court process.

Garnishment also affects your finances beyond your credit report. With less take-home pay, you may struggle to pay other bills, potentially leading to more late payments, collections, and further credit issues.

How To Stop Wage Garnishment

Filing for bankruptcy can provide immediate relief from wage garnishment and other collection efforts thanks to a powerful protection called the automatic stay. This takes effect as soon as you file your bankruptcy case. Creditors are legally required to stop garnishing your wages once they’re notified of your bankruptcy filing. If garnishment continues after you file, notify the court so they can ensure that the garnishment stops. 

There are two main types of personal bankruptcy: Chapter 7 and Chapter 13. Both can help with wage garnishment, but the way they handle your debt is quite different.

Chapter 7 Bankruptcy and Wage Garnishment

A Chapter 7 bankruptcy can completely eliminate most unsecured debts, such as credit card balances, medical bills, and personal loans. Once these debts are discharged, creditors can no longer garnish your wages to collect on them.

However, not all debts can be wiped out in Chapter 7. Certain priority debts, like child support, alimony, and some types of tax debt, aren’t dischargeable. This means wage garnishment for these debts may continue even after your other debts are eliminated.

Chapter 7 is often a good option if you have a large amount of unsecured debt and qualify based on your income. The process is typically faster than Chapter 13 and can give you the financial reset you need without a long-term repayment plan.

Chapter 13 Bankruptcy and Wage Garnishment

If you don’t qualify for Chapter 7 or need more time to manage your debts, a Chapter 13 bankruptcy can help stop wage garnishment and organize your finances. Chapter 13 allows you to create a repayment plan to pay off some or all of your debts over a 3–5-year period.

During this time, creditors can’t garnish your wages. Instead, you’ll make one consolidated monthly payment to the bankruptcy trustee, who distributes the funds to your creditors based on the terms of your plan. This can simplify your finances and protect your paycheck from further garnishment.

Chapter 13 is particularly helpful for people with debts that aren’t dischargeable in Chapter 7, like past-due mortgage payments, car payments, or certain taxes. By spreading payments out over several years, it gives you time to catch up on these obligations while keeping creditors at bay.

How To Avoid Wage Garnishment in the Future

If you’re worried about getting into another wage garnishment situation in the future, there are some steps you can take:

• Reach out to creditors early about possible payment options when you know you can’t pay a debt in full. 

• Talk to your creditors about your financial situation to see if they are willing to schedule payment options or lower your payment amount. 

• Look at refinancing certain debts with lower monthly payments, although this could extend the length of your loan.

• Seek help from a non-profit credit counseling agency.

A credit counseling agency can help you make arrangements with your creditors to make a lump-sum payment to pay all your debts. They can also help you set up a payment plan with your creditors. Choosing debt settlement or setting up a payment plan shows your creditors that you are working in good faith to pay off your consumer debts. 

Bankruptcy is another debt relief tool that can help you avoid wage garnishment. A Chapter 13 bankruptcy allows you to manage all your debts through a 3-year or 5-year plan. A Chapter 7 bankruptcy allows you to discharge most of your debts, except child support payments. You can get help from a local debt relief lawyer who will review your debts and determine if bankruptcy is the right option for you. The attorney can also help you decide between filing a Chapter 7 versus a Chapter 13 bankruptcy plan based on your financial situation. 

Let’s Summarize...

Paying off a wage garnishment is a great accomplishment. It can be scary to get a notice that your creditor is suing you to collect an unpaid debt. If a creditor gets a court judgment against you to garnish your wages, you’ll be living on a limited income for a while. Once the garnishment is paid, be sure to double-check that your paycheck is back to normal and/or that your bank account is no longer being levied. Ensure also that any exempted income you have isn’t being garnished in the process. 

Though dealing with wage garnishment can be difficult, the good news is that once you pay off the garnishment, you can work on building healthier money habits and rebuild your financial life to avoid having your wages garnished again in the future.