What is Wage Garnishment?

Wage garnishment is a process through which some portion of a person's earnings is required to be withheld by an employer for the payment of a debt. Most garnishments are made by court order—a creditor files a lawsuit against you, and the court finds in favor of the creditor.  The IRS and state tax collection agencies, however, do not need a court order to garnish your wages for unpaid taxes. Additionally, through federal agency administrative garnishments, non-tax debts such as unpaid child support or defaulted student loan debt can result in wage garnishment without a court order.

The amount of wages that can be garnished is based on a percentage of disposable income.  Disposable income is the amount left after legally required deductions are made. Legally required deductions include federal, state, and local taxes; the employee’s share of Unemployment Insurance, Medicare, and Social Security; and withholdings for legally required employee retirement contributions.  Any deductions not required by law may not be subtracted from gross earnings when calculating disposable earnings.  These “voluntary deductions” may include:

  • Union dues
  • Health insurance premiums
  • Life insurance premiums
  • Retirement plan contributions (except for those required by law)
  • Flexible spending account contributions
  • Payments for any benefits such as parking and health club memberships

The federal maximum that can be garnished no matter how many garnishment orders an employer receives is lesser of:

25% of the employee’s weekly disposable earnings

OR

The amount by which an employee’s disposable earnings are greater than 30 times the federal minimum wage.  (Based on the current federal minimum wage of $7.25/hour, 30 hours per week is a total of $217.50).

Federal garnishment law allows up to 50% of a worker's disposable earnings to be garnished for alimony or child support if the individual is supporting another spouse or children.  It’s up to 60% if the worker is not. An additional 5% may be garnished for support payments more than 12 weeks in arrears.

If a state wage garnishment law differs from the federal law, the law resulting in the smaller garnishment must be applied.

There are some forms of income that are generally protected from wage garnishment including:

  • Social Security
  • Social Security Disability
  • Retirement
  • Child Support
  • Alimony

If the garnishment is for back federal taxes or defaulted student loans, these sources of income may not be protected.

Federal law prevents employers from firing an employee because her wages have been garnished.  However, an employee is not protected from termination if a second or subsequent debts are garnished from wages.

The easiest way to deal with wage garnishment is to try to avoid it in the first place.  Be proactive and reach out to the places where you owe money.  Set up payment plans with those places and be realistic (not just with them but with yourself) about how much money you can send each month.

Source: U.S. Department of Labor

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