What Is Wage Garnishment and How Does it Work?

Wage garnishment involves your creditor getting a court order to force your employer to withhold a portion of your paycheck.

When your wages are being garnished, a certain amount of your wages is held back each pay period to cover financial obligations like child support, student loans, unpaid taxes, and credit card debt.

Your employer will receive a court order that instructs them to withhold a portion of your wages through payroll deductions to pay these financial obligations until they are resolved.

The Consumer Credit Protection Act (CCPA) sets limits on how much of your wages can be garnished, though these limits don’t apply to all types of debt.¹

The first step in the wage garnishment process is a court order or judgment. If granted, the order or judgment authorizes creditors (or debt collectors on behalf of a creditor) to collect the money they’re owed directly from your wages.

The court order is then sent to your employer, and they are legally required to comply. The employer withholds the specified amount from your earnings and sends it directly to the creditor to help pay down the debt.

The garnished amount is taken from your net income, also called your disposable income. Learn more about gross pay vs. net pay to understand the differences.

The most common types of wage garnishment involve alimony, child support, student loans, tax debt, or consumer debt.

• Alimony or child support: If you owe alimony or child support, the government can garnish your wages without a court order to cover the amount owed.¹
• Student loans: If you default on your federal student loan payments, the entire amount, including principal and interest, becomes due. Once this happens, your lender can garnish your wages or federal payments, including tax refunds.²
• Tax debt: The Internal Revenue Service (IRS) can garnish your wages to cover overdue taxes by issuing a levy that lets it seize your property to cover a tax debt. An IRS levy allows wage garnishment, deductions from your bank account, or seizure of personal property (including real estate and vehicles).³^,⁴
• Consumer debt: Creditors can garnish your wages or benefits once a court issues a judgment. A notice will be sent to your employer, who must comply by withholding the required amount from your paycheck and sending it to the creditor to satisfy the unpaid debt.⁵^,⁶

Generally, the following entities can garnish wages to cover unpaid debt:

• Creditors
• Government agencies
• Student loan providers
• Judgment creditors
• Homeowners’ associations
• Courts

For most types of debt, like credit cards and medical bills, the creditor can’t immediately garnish your wages if you default on your payments. They must first sue you for nonpayment of a debt, obtain a money judgment, and get a court order.

How much can my wages be garnished?

Federal and state laws limit how much money can be garnished from your wages. The exact limits depend on the type of debt you owe, your disposable income, and the number of dependents you claim.

Here are the limits imposed by federal law. Check online to learn about your state’s limits.

Before a court issues a judgment, the creditor will contact you to try to collect on the debt. If you fail to comply, they will move forward with legal proceedings.

When you receive the judgment, it may be served to you by hand or by mail. Carefully read the order to make sure the information is correct. If it is, you have three options:

• Arrange a payment plan with the creditor: The creditor may be willing to arrange a no-interest payment plan or installment plan to help pay off the debt. This is the best solution, but it’s not always possible.
• Accept the garnishment: Upon acceptance, your employer will begin withholding money from your paycheck per the court order.
• Challenge the judgment: If you want to explore this option, contact a legal professional to understand your rights and potential next steps.

Whatever you decide to do after receiving a wage garnishment notice, you must first know your rights. Some rights you have include:

• You must be legally notified of the garnishment.
• You can challenge the garnishment if you believe it was made in error, has inaccurate information, or because it’s causing serious harm to your financial well-being.
• The Consumer Credit Protection Act (CCPA) limits the amount of wages that can be garnished in any given week for consumer debts, child support, and alimony. Other federal laws limit how much can be garnished for delinquent payments on federal taxes and student loans.⁸
• Some forms of income, such as Social Security and veterans’ benefits, are exempt from garnishment as income. However, they could be subject to seizure once in your bank account.⁹
• You can’t be fired because your wages are being garnished for a single debt. However, if your wages are being garnished for two or more debts, your employer may be able to terminate you.¹

When you receive a wage garnishment judgment, you have several options to avoid your wages being withheld:

• Pay off the debt in full. Depending on your financial situation, this may not be feasible. However, it’s worth considering whether you can consolidate the debt to repay the delinquent account or ask a close family member or friend for help.
• Arrange a repayment plan. Contact your creditor and ask whether they’re willing to work with you to repay the debt without wage garnishment.
• Work with a credit counselor. If you’re feeling overwhelmed with your financial situation, a nonprofit credit counselor can help you find solutions to repay your debt and may even work with your creditors on your behalf to arrange a repayment plan.
• Challenge the wage garnishment judgment. If the information in the judgment is inaccurate, you can challenge it. This may result in the judgment being dismissed. It’s best to consult a legal professional for advice if you want to go this route.
• File a claim of exemption. Certain types of income, including child support, alimony, and Social Security, may be exempt from wage garnishments. If you receive any of this income, you can file a claim of exemption to reduce the amount of your wages that are garnished.
• File for bankruptcy. Doing so files an automatic “stay” that stops wage garnishment and other debt collection attempts. However, the stay may only last for 30 days, and it doesn’t apply to certain types of debts owed, like child support or alimony.¹⁰ Consult a bankruptcy attorney before taking any steps.

Tips for avoiding wage garnishment

Here are some money management tips to help you stay on top of your debts and avoid wage garnishment.

• Build an emergency fund: Experts recommend saving between three and six months’ worth of expenses in an emergency fund.¹¹ Keeping this money in a high-yield savings account allows the funds to grow faster over time.
• Make a budget: Budgeting helps you make a plan to achieve your financial goals. By keeping tabs on all your emergency expenses, monthly income, and debt, you can better manage your money.
• Use your debit card: If credit card usage is pushing you further into debt, make your debit card your default payment method. This prevents you from spending money you don’t have.
• Avoid cash advances: A cash advance is when you borrow money against your credit card’s limit, but it comes with high fees and interest charges that take effect immediately and can add up fast.
• Avoid payday loans: These loans have very high interest rates that can lead to more debt. Consider cash advance alternatives instead.

Receiving a wage garnishment notice can be very stressful and place a heavy burden on your finances. Depending on you and your situation, you may want to contact an attorney or seek legal help to figure out your best path forward.