When your unpaid debt goes into collections, you’ll likely receive calls and letters from collectors urging you to pay. If your debt remains unpaid, in some cases, creditors can pursue wage garnishment as a last-ditch attempt to recoup their losses.
Wage garnishment is a legal process that allows creditors to deduct money from a borrower’s paycheck to collect their unpaid debt. If a creditor is able to secure a garnishment of wages, the employer must withhold a portion of funds from the employee’s paycheck until the debt is repaid.
- How wage garnishment works
- How much of your wages can be garnished
- What to do if your creditor is pursuing garnishment
- Your rights in the wage garnishment process
How wage garnishment works
If you don’t pay back your debts, tax bills or mandated payments such as child support, creditors and lenders will try in different ways to obtain payment from you. When more subtle debt collection efforts don’t pay off, the creditor may proceed with wage garnishment — one of the most drastic methods of debt collection.
For most types of debts, if a creditor wants to garnish your wages, they must sue you and take you to court. If they win a judgment against you, they could receive a court order that allows them to garnish your wages whether you like it or not. Some forms of federal debt, such as back taxes owed to the IRS or federal student loans, can result in wage garnishment without needing to go through that legal process. Laws vary a bit from state to state, however.
Read on for more common questions and answers about how wage garnishment works.
The Consumer Credit Protection Act limits how much money can be garnished from your paycheck, though in some cases, there are differences due to state laws. If your state’s laws require a lower garnishment amount, your employer has to use that standard rather than the federal law.
In general, for garnishments other than for child support, bankruptcy or state/federal back taxes, the weekly garnishment amount can’t exceed the lesser of:
- 25% of the disposable earnings; or
- The amount by which the disposable earnings are greater than 30 times the federal minimum wage
Federal agencies can garnish up to 15% of disposable income for defaulted debts that are owed to the U.S. government, and up to 15% of disposable income can be garnished for defaulted federal student loans. According to the Department of Labor, these limits don’t apply to debts for federal or state taxes, or for certain bankruptcy court orders.
If your wages are garnished due to court orders for child support or alimony, the limits under the CCPA are different. In these cases, up to 50% of an employee’s disposable income can be garnished if they’re supporting another spouse or child. If they aren’t, their wages can be garnished up to 60%. If payments are over 12 weeks in arrears, an additional 5% can be garnished.
In 2017, the three major credit bureaus made a move to no longer display civil judgments and tax liens in the public record section of credit reports. This means a wage garnishment judgment shouldn’t appear on your credit report and therefore won’t affect your score. If it does show up on one of your credit reports, you can file a dispute to get it removed.
Possibly; some creditors may be willing to work with you. If you’re notified you’re being taken to court for wage garnishment, call the creditor and ask if there are any alternative options, such as debt settlement or debt repayment plan.
If you think the wage garnishment is inaccurate or that you don’t owe the debt, you can object at the garnishment hearing. The judge has the option of reducing or terminating the garnishment, or they can give the creditor the ability to proceed.
Once a judgment for paycheck garnishment has been issued, your employer will be notified by the court. They are supposed to begin the process of withholding the money from your paycheck and remitting it to the creditor or government as soon as possible, so the garnishment may happen as soon as your next pay period.
When your debt is fully repaid, the wage garnishment will end. While the process varies depending on the type of garnishment, your employer will typically receive a letter from the creditor or government notifying them that the garnishment can be terminated.
When your wages are garnished, they’re taken from your disposable earnings. These earnings are what’s left after legally required deductions such as taxes, Social Security and involuntary retirement contributions. It doesn’t factor in any deductions that aren’t legally required, such as union dues.
Federal benefits are usually exempted from being garnished, according to the Consumer Financial Protection Bureau (CFPB). This includes Social Security, veteran benefits, servicemember pay, federal student loan, federal retirement or disability, and so on. However, the CFPB warns that some benefits may not be exempted if the wage garnishment is for federal student loans, federal taxes or child support.
If you’re unsure of how much you still owe or how much longer your wages will be garnished, contact your creditor directly and ask for your current balance. They can let you know how much you’ve paid so far and how much you have left to go.
How much of your wages can be garnished
The amount of wages that can be garnished depends on a few factors, but most importantly, the type of debt. In general, here’s how much money can be garnished from your paycheck for each form of debt:
|Type of debt||How much income can be garnished|
|Consumer debt, like credit cards, medical bills and personal loans||The lesser of:|
|Court-ordered debt, like child support and alimony||Up to 50% if supporting another spouse or child, or up to 60% if you aren’t. Add 5% if the payments are over 12 weeks behind.|
|Federal student loans||15%|
|Federal taxes||Varies depending on your filing status and dependents|
What to do if your creditor is pursuing garnishment
If you’re being sued by a creditor, first verify that all of the information in the lawsuit is accurate and that it isn’t a debt you’ve already repaid. If the information is correct, there are a few different ways to proceed:
Option 1: Contact your creditors to work out a payment plan
If you’ve been notified that a creditor is suing you and wants to pursue wage garnishment in court, you can try to stop the process before it starts. Call your creditors and ask if they would be willing to create a repayment plan or agree upon a settlement with you.
If you’re nervous about attempting this yourself, you could hire a nonprofit credit counselor to help advise you or help you work with your creditor. For those who can afford it, the CFPB recommends hiring a lawyer who works in consumer law or debt collection defense to help you navigate this process early on.
These proactive measures don’t always work, but they may be worth a shot to try to avoid wage garnishment. Just make sure you act quickly, since wage garnishment is difficult to undo once it’s been decided in court.
Option 2: Object to the garnishment
When you’re sued for wage garnishment, you have the right to attend the hearing and object to the process. The process varies depending on the type of debt and the state where you reside. Your garnishment papers should explain what you need to do in order to object to the decision, but if they don’t, contact the court to find out.
If the creditor is granted the court order for wage garnishment in court, you may still be able to challenge it. The documents you receive with the court order should explain how you can challenge it in court and how much time you have to do so, though you may only have a matter of days. It may be wise to employ a lawyer to help you navigate this process. If you can’t afford one, see if your area has a low-cost or free legal clinic or legal aid office.
Also, keep in mind that you will need a legitimate reason for your challenge or objection, such as that you’ve already paid the debt or you’ll experience financial hardship if it’s implemented.
Option 3: Accept the garnishment
Perhaps the lawsuit is accurate — you owe the debt, and your creditor won’t agree to a repayment plan or settlement. If you’re still able to make ends meet with the garnished wages, one option is to simply go along with the process.
It may be a hard pill to swallow, but take solace in knowing that the money coming out of your paycheck will go toward the debt you owe, and once it’s fully repaid, the garnishment will end.
Your rights in the wage garnishment process
Under the Fair Debt Collection Practices Act, a creditor can’t threaten to garnish your wages if they aren’t able to legally garnish them.
If you’re wondering how to stop wage garnishment, you may have a few options:
- Bankruptcy: While it’s a last resort and not always advisable, filing for bankruptcy may allow you to avoid wage garnishment from consumer debts (but not court-ordered debts).
- Claim an exemption: Some states also allow you to claim exemptions, such as a head of household exemption, if you’re the primary breadwinner for your family and can’t survive on the adjusted wages. This could either prevent the judge from granting the garnishment or reducing how much is taken from your paycheck.
Additionally, under federal law, an employer cannot fire you or take any negative actions against you if your wages are garnished for one debt. An employer also can’t refuse to hire you because of this. Be aware, however, that you are no longer protected from getting fired if your wages are garnished for a second or future debt.
As a general rule, if you’re unsure of your rights in the wage garnishment process, consider hiring an attorney, or visiting a local legal clinic or legal aid office to assist you.