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 to force your employer to withhold a portion 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?
Wage garnishment is a legal procedure in which a portion of a person’s paycheck is withheld from them and sent directly to creditors to whom the person owes money. 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.
Your wages can be garnished for a number of reasons. Unpaid child support, back taxes, delinquent federal student loans, or consumer debt, like credit card balances and medical bills, are all common sources of wage garnishment. Your earnings will be garnished until the debt is paid off or otherwise resolved.
How does wage garnishment work?
Garnishment is a fairly severe consequence and is usually done as a last resort, used only when someone is seriously behind on their debts. For a debtor’s wage to be garnished, a creditor must typically obtain a court order proving that the debtor owes money and has defaulted on payment. But not all types of wage garnishments require a court order. For example, if the debt is an Internal Revenue Service (IRS) levy, a court order isn’t required.
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:
- 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? Types of garnishments
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. The creditor must first sue you for nonpayment of a debt, obtain a money judgment, and get a court order. But again, depending on the type of debt, not all creditors need a court order.
The type of debt determines who can garnish your wages and what that creditor must do before starting a wage garnishment. Here are some examples:
- Student Loans: If you’re behind on your federal student loan payments, the U.S. Department of Education (or any entity collecting on its behalf) can garnish your wages without a court order. It can take up to 15% of your disposable income without taking you to court.
- Taxes: If you owe back taxes to the IRS, the federal government can garnish your wages without having to get a court order against you. How much the IRS can garnish depends on the number of dependents you have and your deduction amounts.
- Consumer Debt: A court order is needed to collect on consumer debt, such as credit cards, medical bills, and personal loans. Federal law places limits on how much judgment creditors can take from your paycheck. The garnishment amount is limited to 25% of your disposable earnings per week or the amount by which your disposable earnings for a week exceed 30 times the federal minimum hourly wage, whichever is less.
- Child Support and Alimony: When it comes to child support and alimony, the government doesn’t have to go through the court system to get a wage garnishment. For child support obligations, federal law allows a garnishment of up to 50% of your disposable earnings if you are supporting an additional spouse or child who isn’t the subject of the wage garnishment order themselves. If you don’t have an additional spouse or child to support, this amount can be 60%. Further, the garnishment may be increased by an extra 5% if you’re behind 12 weeks or more on your obligations.
What to do if you receive a wage garnishment judgment
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, but in most states, it’s your responsibility to be aware of and exercise these rights. Some rights you have 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.
- There are caps on how much can be taken at once from your wages. The Consumer Credit Protection Act (CCPA) limits the amount of wages that can be garnished in any given week for consumer debts and for child support and alimony. Other federal laws limit how much can be garnished for delinquent payments on federal taxes and student loans.
- 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.
- You can’t be fired because your wages are being garnished for a single debt. However, if your wages are being garnished for 2 or more debts, your employer may be able to terminate 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 and helps you make a plan for achieving your financial goals. 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.)
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.
|Type of debt||How much can be garnished|
|Consumer debt||The 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 loans||Up to 15% of disposable income.|
|Federal taxes||Depends on number of claimed dependents and filing status.|
|Child support and alimony||50% 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?
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.