What is Wage Garnishment?
Wage garnishment occurs when your employer or bank are legally required to withhold your earnings to settle an outstanding debt.
This debt is often child support, unpaid taxes or student loans, but garnished wages can also be used to pay outstanding medical bills or credit card balances. Creditors use wage garnishment as a last resort when they can’t get in touch with you about debt repayment. The process often involves creditors filing suit and getting a court order, but not always, as is the case when who you owe is the federal government.
Read on to learn more about wage garnishment and how it works.
Table of Contents
- How does wage garnishment work?
- Types of wage garnishment
- Types of income subject to wage garnishment
- How much of your disposable income can be garnished
- What to do when you receive a wage garnishment judgment
- Wage garnishment FAQs
How does wage garnishment work?
Wage garnishment is a legal action creditors use to collect money from a debtor when they believe there’s no other way of getting what they’re owed. Having your wages garnished not only affects your finances, it can also impact your credit score and make improving your credit all the harder.
In the wage garnishment process, a creditor, after failing to receive payment from the debtor, files a suit and a court issues an order mandating the garnishment. However, garnishment can also occur through other legal procedures when you owe the federal government. In either case, employers or banks are then required by the court to garnish the debtor's wages until the debt has been repaid.
After the decision, the court will notify you and your employer or bank about the withholding order. Once you’ve been notified, the start date will depend on your creditor or state, but it usually starts anywhere between five to 30 business days after the notice of judgment.
The U.S. Department of Labor oversees garnishment and ensures that Title III of the Consumer Credit Protection Act (CCPA) is followed. This law limits how much of an individual's disposable earnings can be garnished and prevents employers from firing employees that have a garnishment order against them to repay a debt.
What is considered disposable income for wage garnishment
Disposable income is everything that’s left from your salary after all legally required deductions are made. These deductions include local, state and federal taxes, as well as an employee's share of Social Security, Medicare and state unemployment insurance. Withholdings for employee retirement systems also fall under deductions, therefore can’t be garnished.
Types of wage garnishment
When a creditor files and wins a suit against you, there are two ways they can garnish your wages: directly from your paycheck or a bank account.
Wage garnishment
Wage garnishment is when a court orders your employer to take out a determined amount out of your paycheck.
Non-wage garnishment
Non-wage garnishment, also called a bank levy, is when the court allows creditors to withdraw the funds from your bank account. Often, the bank freezes your account after it’s notified of the legal action against you and sends the funds owed to the creditor who initiated the legal action.
Types of income subject to wage garnishment
Earnings from any type of employment are subject to garnishment. The CCPA, the wage garnishment law that regulates and defines garnishment, considers earnings to be any compensation paid or payable for personal services. These earnings include:
- Wages
- Salaries
- Commissions
- Bonuses
- Pension or retirement payments
- Employment-based disability programs
- Lump-sum payments (referral bonuses, service awards, etc.)
There are some types of income, such as Social Security or unemployment insurance benefits, that are exempt from garnishment if the debt is due to consumer credit cards or loans. However, this income can also be garnished if you owe child support or the federal government.
While there’s a federal garnishment law, each state has passed its own laws to provide further protections or exemptions. These only take precedence over federal law when the state law is more restrictive. For example, North Carolina, Pennsylvania, South Carolina and Texas don’t allow wage garnishment for debts owed to creditors although federal law allows it.
In California, your wages can be garnished only up to the limits established by the federal government, but the state uses the local minimum wage to calculate the garnishment amount.
New York creditors can garnish up to 10% of your gross income or 25% of your weekly disposable income, whichever is less, as long as this doesn’t reduce your weekly disposable income to less than $450 a week.
How much of your disposable income can be garnished
The rule is that garnishment may not exceed 25% of an individual’s disposable income for a week or 30 times the Federal minimum hourly wage (currently $7.25 an hour), whichever is less.
However, these limitations do not apply to bankruptcy court orders or garnishment to pay for debts owed for federal, state or local taxes.
Your particular circumstance and amount owed will determine the maximum amount of income that will be garnished. The table below breaks down how much can be garnished based on the type of debt.
| Types of Debt | % of disposable income that can be garnished |
| Taxes (Federal or state) | There’s no established percent because the CCPA’s Title III limits do not apply to federal or state taxes. The IRS bases the amount garnished on an individual’s deductions and the number of dependents they have. |
| Consumer Debts (credit cards, personal loans, medical bills) | Up to 25% of an individual's disposable earnings or no more than 30 times the federal minimum wage, whichever is less. |
| Child support and alimony | Up to 50% of a worker’s disposable income if the person supports a spouse or child and up to 60% if the person doesn’t claim any dependents on their tax returns. If the payments are more than 12 weeks overdue, another 5% may be garnished. |
| Federal student loans | Up to 15% of disposable earnings. |
What to do when you receive a wage garnishment judgment
When you receive a garnishment judgment, we suggest you act quickly because the time between when the court issues the judgment and the garnishment begins can be a few short days. After you get the notice you should:
1. Check for errors - Read the judgment carefully to make sure all the information is correct. Check the name of the creditor and the amount owed to make sure it’s your account. If all the information is correct, look for instructions on how to object to the garnishment.
If the information is inaccurate, you can dispute the judgment. In this case, we also suggest you review your credit score and dispute any collection information that is incorrect. Learn to remove debt collections from your credit report by reading our guide.
2. Work out a deal with creditors - Contact the creditor. Ultimately, what the creditor wants is to get paid, so reaching out and discussing your options with them directly may go a long way. You can negotiate a different deal or payment plan that can work for both of you. (Consulting a lawyer may also help you work out a deal.)
3. Accept and pay - If the creditor no longer wishes to negotiate or you don’t want to file for bankruptcy, then there’s nothing for you to do. In this case, you can opt for temporary solutions such as taking out a personal loan or borrowing from relatives.
Another option available is filing for an emergency bankruptcy to stop the garnishment and possibly get back whatever has been garnished already. However, don’t jump the gun on this as once you file the initial petition you’ll have a limited amount of time to present the bankruptcy documents. We strongly suggest you consult a bankruptcy lawyer to learn more about the process and whether this is a good option for you.
Wage garnishment FAQs
When does wage garnishment start?
Wage garnishment begins between five and 30 days after the court issues the order and sends out the notice to you and your employer or bank. One exception is in Mississippi, where the law states that creditors cannot garnish wages for the first 30 days after the court order is served.
When an individual owes a non-tax debt to a federal agency, garnishment of wages begins the first pay period after receiving the order.
How long does wage garnishment last?
What happens after a wage garnishment is paid?
How does wage garnishment affect your credit?
The garnishment itself won't affect your credit. This is because courts don't send garnishment notices to the credit reporting agencies. What will be on your report is that you defaulted on the loan in the first place. Creditors can add a note to your account saying it's receiving payments as a result of a garnishment judgment.
Any negative information on your credit report — whether it's late or missed payments, accounts sent to collection agencies, outstanding loans or credit card accounts or bankruptcies — remains on your credit report for seven years.