Seeking help around financial situations is a very personal topic, so it can be difficult to talk about or know your rights. Choosing to ignore a serious financial situation, however, can hurt you and the family you support.
If you owe money to creditors, you may be concerned about the potential for wage garnishment – the mandated right for specified creditors to collect on debts you owe, directly from your paycheck. Wage garnishment is a serious action that typically involves court action, so it is not the first step for most creditors who are seeking to collect outstanding debts. Still, wage garnishment can be scary and it might feel threatening – how will you support yourself and your family if all your money is being direct elsewhere? What are the long-term ramifications of wage garnishment?
Fortunately, there are federal laws in place that ensure your entire paycheck cannot be garnished. There are additional ways to avoid or protest against court-ordered wage garnishment, too.
Understanding your rights is the first step to protecting yourself in the scenario of wage garnishment. At San Diego Bankruptcy Attorney, we compiled the information below as a brief, factual overview on wage garnishment. This information is not intended as legal counsel, as only a legal professional with experience in this field and knowledge of your personal situation may provide that.
What is garnishment?
A garnishment is a legal or otherwise equitable process in which a plaintiff – usually a creditor and sometimes known as a garnishor – can collect money directly from the paycheck of the debtor, known as a garnishee.
A wage garnishment is the most common type of garnishment in the U.S. The debtor typically must set aside a pre-set amount of his or her paycheck and send it to directly to the institution or person who is owed the money. Most garnishments are decided by court action, and a court order specifies the terms and amounts of the garnishment.
When a court orders the garnishment of your wages, it refers to the deduction of money from an employee’s salary or other monetary compensation. A court ordered garnishment is usually stipulated to continue until the entire debt is paid and/or the debtor and the creditor make other arrangements to pay the debt.
Federal wage garnishment laws
The U.S. Department of Labor oversees wage garnishments as outlined in the Federal Wage Garnishment Law, Consumer Credit Protection Act (CCPA) Title III. This law limits the amount of money that may be garnished from a debtor. It further protects an employee from being fired or retaliated against for a single debt.
This law applies across all of the United States and it protects anyone who receives personal earnings through compensation, which is defined as:
- Salaries and wages
- Bonuses and commissions
- Other compensation, such as period payments from a retirement program or pension or payments from an employment-based disability program
The law also applies limits to general garnishments as well as the amounts that could be garnished in scenarios that relate to child support and spousal support or alimony. In the case of child or spouse support situations, the creditor can garnish up to 50 percent of a debtor’s disposable earnings if the debtor supports a different child or spouse, or up to 60 percent if the debtor is not supporting anyone else. Furthermore, the creditor can garnish another 5 percent for any support payments that have been outstanding for over 12 weeks.
Importantly, the law regarding the total amount of earnings that can be garnished does not apply to:
- Certain bankruptcy court orders
- Debts owed for state or federal taxes
Other federal debt collection laws include:
- The Debt Collection Improvement Act, which allows federal agencies or collection agencies that contract with the federal government to garnish up to 50 percent of a debtor’s disposable earnings in order to repay any defaulted debts to the U.S. government.
- The Higher Education Act, which allows the Department of Education guaranty agencies to garnish up to 10 percent of a debtor’s disposable income in order to repay defaulted federal student loans.
The debtor should direct any questions regarding garnishment directly to the creditor agency that obtained the court order or is seeking court action, unless the total of all garnishments (beyond a single one) exceeds 25 percent of disposable earnings.
Wage garnishment laws in California
States must comply with the existing federal laws and are able to enact stricter rules, should they decide to do so. The State of California, however, does not impose stricter limits in terms of wage garnishment, so the federal statutes stand.
The State of California Labor and Workforce Development Agency and the Department of Industrial Relations both handle claims of wage garnishment as well as protests against garnishment.
Court order is necessary to garnish wages in most situations
In most scenarios, a creditor who is seeking outstanding debts must take the debtor to court – typically they would sue you, and if the court awards them a win, the court orders a specific amount the debtor must pay. This applies to most creditors, such as a credit card company or bank, a doctor or health insurance provider, an individual party, etc.
However, a court judgment is not required for a creditor to garnish wages of a debtor in the areas of:
- Child support
- Defaulted student loans
- Outstanding court costs
If the creditor happens to the be the debtor’s employer, the creditor may obtain a court order and can then withhold money directly from the payroll. If, however, the creditor is not the employer, the creditor would likely provide a copy of the court order to local police or sheriff who forwards it to the employer. The employer must then notify the debtor of the garnishment before withholding part of his or her salary/wages. The employer must also include any necessary information on protesting the garnishment.
Not all types of money can be garnished
How much of your wages are available for garnishment has a lot to do with what sorts of debts you have incurred. Importantly, not all your money can be garnished, and more specific types of monies cannot be garnished at all.
For instance, someone who receives Social Security, disability payments, or Supplemental Security Income (SSI) could very well be living on a fixed, tight income. The Social Security Act, a federal law, actually makes it illegal for any creditor to garnish money from Social Security and SSI.
Depending on other types of income you have, you may be well advised by a lawyer to keep any Social Security or SSI payments separate from other income and/or assets, so that the money cannot be confused as to its source.
Rights of the debtor
Federal laws limit how much money creditors are able to take from a debtor’s paycheck for general garnishments. The standard limit is the lower of either condition:
- 25 percent of your disposable earnings per paycheck (that is, the amount that’s left once mandatory deductions are made), or
- The amount your weekly wages exceed 30 times the applicable minimum wage
Additional laws ensure that certain types of income, such as Social Security, cannot be garnished.
Laws also protect the debtor from being fired or otherwise facing retaliation due to wage garnishment for a single debt. If, however, you have more than one garnishment, whether from two different creditors or a single creditor with multiple debts, you may no longer have protection from retaliation.
While wage garnishment is the most common type of garnishment in the U.S., you may also hear about nonwage garnishment. Like wage garnishment, nonwage garnishment requires a court action in most situations, but instead of going after income, a nonwage garnishment seeks funds that are already held in a bank account. This may be because the debtor is not gainfully employed.
In nonwage garnishment, funds are separated into exempt or nonexempt funds.
Tips for avoiding wage garnishment
Establishing a healthy financial plan is the key to avoiding significant debt, altogether reducing the likelihood of wage garnishment. Still, perhaps significant bills from a medical situation or credit card debt mean you are a candidate for wage garnishment. That does not mean you have no options. Here are some ways to avoid wage garnishment when you think you are at risk for it:
- Don’t ignore your debt. Wage garnishment is a serious action that requires court order, so it is often a last-ditch effort on the part of the creditor to obtain back debts. If you’ve communicated earlier, wage garnishment can often be avoided.
- Establish a plan. As the debtor, you may be able to avoid this situation simply by asking about alternative payment plans. Many creditors are open to any type of payment, even if the payments are a small portion of what you owe.
- Communicate often. As your situation changes, what you can pay on your debt may shift, too. Communicate with all your creditors as often as possible about these changes so they know your intention to repay your debts is still there.
- Know your rights. Most debts require a court action, so you’ll want to understand your rights in a court of law should a creditor sue you for outstanding debts.
- Speak with a labor attorney. Experienced lawyers who specialize in this field can help you understand rights or alternative options you didn’t know you had.
Tips for stopping wage garnishment
Even if a wage garnishment has been court ordered against you, as the debtor, you still have some options for stopping wage garnishment. Here are some steps you can take to put an end to your wage garnishment.
- Pay your debt in full. The wage garnishment typically applies to a single specific debt. If possible, pay off this debt and the garnishment will stop.
- Understand your options. Wage garnishment varies based on the type of debt and the court order against you as the debtor. Talking with a professional attorney with experience in wage garnishment will help you understand specific options for your unique situation.
- Communicate with your creditor. Even if a wage garnishment is ordered against you, you risk nothing in trying to arrange an alternative payment plan with the creditor. Most court orders for garnishment stipulate that a creditor stops garnishment upon receiving the debt in full or for arranging an alternative payment plan with the debtor.
- File an exemption. California has an option for a garnishment exemption, which you can file in order to show that you need potential garnished wages to continue supporting you and your family.
- Protest the judgment. Once a court orders garnishment, the debtor does have the right to protest the court decision. The process includes filing documents with the court for a hearing wherein you will present evidence that you either need more of your paycheck than the garnishment allows or that you should have an exemption. The judge makes a decision to terminate your garnishment or leave it as-is.
- File for bankruptcy. This may be an extreme option, but bankruptcy can be used in a strategic way to help you clear your debts. Once you file for bankruptcy, an automatic stay is put on your account to prevent any current garnishments from continuing.
Financial situations, such as inability to pay debts and wage garnishment, are often the hardest for people to talk about, let alone seek help on. Experienced professionals can help you navigate the legal and financial long-term effects of wage garnishment while also respecting your emotions and concerns about this extremely personal topic.
At San Diego Bankruptcy Attorney, our team of lawyers and legal professionals have significant experience helping clients across San Diego navigate and fight the consequences of wage garnishment. We can help you weigh your options and seek the best outcome for you and your family. Contact us today to get started – simply call 619-488-6168 and our friendly, helpful team of professionals will be happy to help.