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Banking Basics

What is Wage Garnishment and What Can You Do About It?

If you have unresolved debt, creditors can withhold a portion of your paycheck to resolve it. Learn what you need to know about wage garnishments so you can be better prepared.

Rachel Velez • February 17, 2022

In This Article

  1. What is wage garnishment?
  2. How does wage garnishment work?
  3. Who can garnish wages?
  4. Know your rights: What to do if you receive a wage garnishment order
  5. How to avoid wage garnishment
  6. FAQs
  7. Final thoughts

Financial stress and anxiety are plaguing a large portion of the population — and they have been, even pre-pandemic — with debt being a leading cause of these financial burdens. No matter how hard you try to avert it, debt has a sneaky way of creeping up on you. 

Creditors will ultimately find a way to get the money you owe them, even going to the extent of getting a court order so that your employer withholds some of your paycheck — this is called a wage garnishment, and it can have some serious repercussions on you and your financial wellbeing.

What is wage garnishment?

Let’s say you’ve found yourself falling behind on your student loans. Wage garnishment is a legal method your student loan creditor can take to collect some of your paycheck. 

Typically an employer is instructed by court order to deduct payment from an employee’s paycheck in order to repay a debt. Wages can also be deducted straight from a person’s bank account. 

How does wage garnishment work?

Garnishment is usually reserved for extreme cases. Once a wage garnishment has been approved by the court, an order will be issued requiring the debtor’s employer to withhold a certain amount of their paycheck, along with a letter and specific instructions for the employer. The employer usually has to notify its employee that wage garnishment is about to start before remitting payments. The wage garnishment will typically continue until the debts are paid off.

According to the U.S. Department of Labor, earnings subject to wage garnishment can include:

  • Wages
  • Salaries
  • Commissions
  • Bonuses
  • Periodic payments from a pension, retirement program, or an employment-based disability plan
  • Payments received in lump sums, such as severance pay, workers’ compensation, or insurance settlements

Who can garnish wages?

Typically, creditors can’t garnish wages as soon as you default and are often required to pursue a series of legal steps, such as obtaining a court order, but it all depends on the type of debt. 

For example, student loan creditors can take as much as 15% of your disposable income without taking you to court, but a court order is needed to collect on consumer debt such as credit cards, medical bills, and personal loans.

Know your rights: What to do if you receive a wage garnishment order

If you receive a wage garnishment judgment, the first thing you should do is carefully read the order to make sure all the information is correct. Check to verify that the order is, in fact, for your debt and that the amounts are accurate. If all the information is correct, then you can either challenge the judgment, accept the garnishment, or work out a payment plan with the creditor. Don’t underestimate the latter. Sometimes, simply picking up the phone and explaining your situation to a creditor can help alleviate some of the burden. Consider asking about a no-interest repayment plan or installment plan to help pay off the debt.

The important thing to acknowledge is that you have legal rights when it comes to wage garnishment, it’s your responsibility to be aware of your rights in your state. Some points to keep in mind include:

  • You have to 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 wellbeing.
  • Your wages are protected by a cap (on how much can be taken) depending on the type of debt. 
  • Your Social Security and other forms of income may be exempt from garnishment
  • If your wages are being garnished by 2 or more creditors, your employer may legally be able to fire you.

How to avoid wage garnishment

Wage garnishment can be avoided entirely as long as you stay on top of your debts and maintain a consistent payment schedule. Of course, sometimes life and other obligations get in the way and can hinder your ability to pay creditors on time.

If you are struggling to meet your payment obligations each month, creating a solid financial plan might help. To get you started, check out some of the following money management tips that could help you steer clear of a wage garnishment.  

  • Open a savings account: Having a savings account will help you build long-term savings by stashing money in a safe place separate from your checking account. (Pro tip: A high-yield savings account will allow you to grow your money faster over time.)
  • Make a budget: Budgeting gives you a better sense of where you are splurging your money. By keeping tabs on all your monthly expenses, monthly income, and debts, you can better manage your money. (Pro tip: The 50/30/20 budget rule is a simple solution for those struggling to stay within their means.)
  • Utilize debit over credit: If credit card usage is putting you further and further into debt, try utilizing your debit card more than your credit card. Since you can’t spend money you don’t have with a debit card, it might be worth choosing the more affordable option when it comes to buying and spending. (Pro tip: If you are looking for a way to build your credit while minimizing debt, get a secured credit card. Secured cards usually have a lower credit limit than traditional credit cards, which can help prevent taking on more debt.) 

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FAQs

How much money can be garnished from my paycheck?

Federal and state laws limit how much can be garnished. Here’s an overview of the federal limits on how much of your disposable income a creditor can take. For state laws, consult with your state’s legislation.

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Type of debtHow much can be garnished 
Consumer debtThe maximum amount garnished per pay period can’t be more than 25% of your disposable income, or if less, the amount by which your disposable income exceeds 30 times the federal minimum wage.
Federal student loansUp to 15% of disposable income.
Federal taxesDepends on number of claimed dependents and filing status.
Child support and alimony50% if you are supporting an additional child or spouse; otherwise, up to 60%.

If you are more than 12 weeks late in payments, an extra 5% may be taken.

How do I check my wage garnishment balance?

Reach out to your creditor. The creditor or its attorney is responsible for keeping track of the payments made toward the debt. 

Can wage garnishment hurt my credit score?

While wage garnishments themselves don’t show up on your credit report, the court judgment to garnish your wages is a matter of public record and can show up on a credit report. Ultimately, the delinquency (aka missed payment) and the judgment are what can harm an individual’s credit rating. 

Can unemployment benefits be garnished?

In most cases, your unemployment benefits are exempt from garnishment. However, if you owe child or spousal support, taxes, student loan debt, or money to the state issuing you the benefits, a creditor could garnish your unemployment benefits.

Can my wages be garnished without notification?

No, wages can’t be garnished without notifying you first. You’ll often receive several notices by the court or creditor before any wages are withheld. Depending on your creditor and state, notices are typically sent 30 days before the garnishment is put into effect.

Can I stop wage garnishment by filing for bankruptcy?

Filing for bankruptcy will pause most debt collection efforts by placing what is known as an automatic stay on your debt. The stay prohibits most creditors from taking or continuing actions to collect debts, including preventing or stopping a wage garnishment.

The automatic stay usually lasts until a bankruptcy case is closed or the debts are discharged unless the debtor has declared bankruptcy multiple times within a year. If this is the case, the stay might last only 30 days or not be issued at all. Filing for bankruptcy stops wage garnishment for consumer debts but not for court-ordered debts like child support.

Final thoughts

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. 

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