Who Can Garnish My Wages?

Wage garnishment laws give creditors the ability to withhold money from your paycheck when you don’t pay your debts. Creditors like hospitals, credit card companies, and loan companies can go to court and get a garnishment order that instructs your employer to withhold a certain amount of money from your paycheck until the debt is paid off. Creditors like the IRS and state tax collection agencies do not have to go to court before they’re allowed to garnish your wages for unpaid taxes. 

Federal law limits how much money an employer can take from your disposable earnings. Filing for bankruptcy stops most wage garnishments, but not if you have unpaid child support payments. This article will explain what wage garnishment is, who can garnish your wages, and how bankruptcy can help stop wage garnishment.

Introduction to Wage Garnishment

When you make a student loan, buy a car, or open up a credit card account, the paperwork you sign contains language that outlines what your creditor can do if you stop making payments. The language states that your creditor has the right to sue you in court for unpaid debts. It also typically states that the creditor can ask the court to have you pay court costs and attorney fees associated with collecting the unpaid debt, as well as interest on the balance owed. The creditor will typically request a wage garnishment order to recoup the money you owe.

If you receive a summons, open it.

Many types of creditors have the right to file a complaint in court for unpaid debt, including hospitals seeking payments for past-due medical bills, credit card companies, personal loan providers, and other lenders. Once this paperwork is filed with the clerk of the court, you will receive a summons. Open the summons immediately so you can answer within the timeframe stated in the paperwork. You may be tempted to ignore it, but remember that many people successfully fight creditor lawsuits. It’s also important to read the summons to make sure it doesn’t have any errors, like the amount of money owed. 

Some state laws allow wage garnishments to happen in two steps: First, a judgment from the court is issued. Then a post-judgment process occurs, where your employer receives the garnishment order to withhold money from your paycheck. Other state laws streamline the process by including the withholding order as part of the court judgment for the wage garnishment. 

If your creditors receive a judgment, they can ask the judge for a withholding or garnishment order that allows them to garnish your wages. This order then goes to your employer, who will withhold part of your earnings from your paycheck. The money withheld will be sent to either the court or the creditor, as specified in the garnishment order. 

Federal law limits how much can be withheld from your wages.

Your entire paycheck cannot be withheld, as you still need to have money to cover your living expenses. Under a federal law known as the Consumer Credit Protection Act (CCPA), there are garnishment limits placed on the amount of money that can be withheld from your wages. This federal law limits how much money your employer can withhold. This law applies in all 50 states. 

The amount of money withheld depends on your pay period, which might be weekly or bi-weekly. Generally, the amount is the lesser of 25% of your disposable income or the amount by which your disposable income exceeds 30 times the federal minimum wage of $7.25 per hour. Also, under the CCPA, you can’t be fired if your employer receives a withholding order. 

Some income is exempt from garnishment.

This federal law also provides exempts certain types of income from being garnished. It is important to understand these exemptions, especially if you are retired or have a disability. There are also state law exemptions. These exemptions include income from Social Security benefits, unemployment payments, retirement, workers’ compensation, and life insurance. 

You can file a claim of exemption with the court. This claim of exemption will stop some or all of the money being garnished from being withheld from your paycheck. Once the garnishment order is granted to your creditor, you have a very limited time to file a claim for exemption. Some states give you as few as five days, so file your claim of exemption as soon as you receive a copy of the garnishment order.  

Child and Spousal Support (Alimony) Payments and Wage Garnishment

The Consumer Credit and Protection Act allows up to 50% of your disposable earnings to be garnished for child and spousal (alimony) payments if the employee (worker) is supporting another spouse or child not named in the support order. If the employee is not supporting another spouse or child, 60% of the employee’s disposable earnings can be withheld from their paycheck. If you fail to pay child or alimony payments for 12 weeks, an additional 5% can be withheld from your disposable earnings under federal law. 

Support payments for unpaid child support and alimony (spousal support) are sometimes subject to different rules under state laws. Most states will not excuse you from paying child and spousal support payments if your wages are garnished by creditors. In fact, you could face additional penalties for unpaid child support. These penalties include having your driver’s license revoked and paying additional monetary fees. States may also impose criminal charges that can lead to jail time for unpaid child support. So, it is very important to understand child support enforcement laws if you have support obligations and your income is being impacted by garnishment orders.   

Federal Student Loans, Back Taxes, and Wage Garnishment

There are specific federal rules for certain types of debt, like unpaid federal student loans and income taxes. If you are in default, the Department of Education, the IRS, and state governments can garnish your wages without going to court. But the rules require that these federal agencies give you notice before they begin to garnish your wages. An agency will send a demand for payment letter, and you will have 30 days to respond. After that, if you have not paid the debt in full, you will receive a final notice and intent to levy your paycheck or bank account. 

After giving you proper notice, the Department of Education can garnish or withhold up to 15% of your disposable earnings from your paycheck.

Using Bankruptcy to Avoid Wage Garnishment

Bankruptcy can be a useful tool for people who are facing wage garnishment. One of the benefits of filing for bankruptcy is that it stops almost all types of debt collection activity, including most wage garnishments, for the duration of the bankruptcy case. Most debts can be discharged in a Chapter 7 bankruptcy. Child support obligations are one exception. They cannot be discharged in bankruptcy. Child support payments must continue in full during the bankruptcy case, but freedom from other debt collection can help make it easier to pay this type of support. Upsolve has a free web tool that can help you file simple Chapter 7 bankruptcy cases without a lawyer. This can help you achieve debt relief.

Let’s Summarize...

Having your wages garnished can create a huge financial burden, as it reduces the amount of money available to pay your living expenses. All types of creditors can seek wage garnishment for unpaid debts. Most creditors must go to court before they can garnish your wages. If they are successful, the court will grant them a writ of execution to withhold money from your paycheck or levy your bank account. If you receive a summons, do not ignore this legal document! 

Government creditors, like the IRS and state tax collection agencies, follow different rules for garnishing your wages. They do not have to go to court to get a garnishment order. The Department of Education can also garnish your wages for unpaid student loans without going to court. 

The Consumer Credit Protection Act limits the amount of money that can be withheld from your paycheck. Federal law also provides exemptions from garnishment for certain types of income, like disability and retirement income. You will need to file a claim of exemption with the court to protect some or all of your income from garnishment. Filing for bankruptcy can also stop wage garnishment for most debts. If you have questions or concerns about how wage garnishment may affect your paycheck, a lawyer can help you sort through your debts and figure out the right option for you.