Wage Garnishment During a Debt Settlement Program
Wage garnishments are extremely rare in debt settlement programs. Here are some things to know about them and how we resolve them when they happen.
WHAT IS WAGE GARNISHMENT?
A wage garnishment is a legal proceeding through which a portion of a debtor’s earnings is withheld for the payment of a debt. This process allows creditors to collect the debt directly from your employer, bank account, or financial institution.
HOW DO CREDITORS COLLECT DEBT FROM A PAYCHECK?
First, a creditor must file a lawsuit to collect what you owe them and win a judgment against you. Second, after winning the judgment, the creditor must ask the judge to issue a “writ of garnishment” by which the court orders the seizure of your money that is in the control of a third party, “the garnishee”. The garnishee is the party in possession of the debtor’s property, usually your employer or your bank account. And third, once a garnishment is issued by the court, the debtor will receive a notice with the service of the process of garnishment on the garnishee. Although each state outlines its wage garnishment procedures, most garnishment orders are ongoing until the debt is completely paid or set an end date. The enforcement of the writ of garnishment is governed by state law. Depending on your state’s particular laws, you may have the right to raise an objection to a wage garnishment order. Also, the process varies if you are claiming federal or state exemptions. Once your employer receives a copy of the writ of garnishment, your employer is legally bound to withhold your wages and is not legally able to negotiate the terms of the writ of garnishment. However, federal and state laws limit the amount that can be garnished from your paycheck.
Only after the creditor obtains a judgment against you, the creditor has the right to garnish your wages.
There are two exceptions to this: (1) the federal government may issue an “administrative wage garnishment” to garnish your wages and seize tax refunds to repay payroll taxes, unpaid federal taxes, student loans, child support, alimony, or other debt owed to the government; and (2) secured creditors, such as your mortgage or auto lender, may seize their collateral if you are behind on your payments without a court order.
WHAT AMOUNT OF EARNINGS MAY BE GARNISHED?
Title III of the Consumer Credit Protection Act (“CCPA”) sets the amount of a person’s earnings that may be garnished. Consumer Credit Protection Act is a federal law that protects consumers from creditors and applies to all 50 states. However, the CCPA does not provide a list of priorities for garnishments that are governed by state or other federal laws.
The amount subject to garnishment is based on a debtor’s “disposable earnings,” which is the amount of earnings left after legally required deductions are made. Thus, disposable earnings are equal to gross wages minus federal and state income and payroll taxes.
In any event, however, the amount that may be garnished from a person’s disposable earnings must not exceed the percentages set by the CCPA. Under the statute §1673 of the CCPA (15 USC 1673: Restriction on garnishment (house.gov)), the garnished amount is limited to 25% of your disposable earnings for that week or your disposable earnings less than 30 times the federal minimum wage (which is $7.25 per hour), whichever is less. Thus, you must make 30% of the minimum wage for a 40-hour week for wages to be garnished.
| Weekly | Biweekly | Semimonthly | Monthly |
| If you earn $217.50 or less: No wages may be garnished. | If you earn $435.00 or less: No wages may be garnished. | If you earn $471.25 or less: No wages may be garnished. | If you earn $942.50 or less: No wages may be garnished. |
| If you earn more than $217.50 but less than $290.00: Any amount above $217.50 may be garnished. | If you earn more than $435.00 but less than $580.00: Any amount above $435.00 may be garnished. | If you earn more than $471.25 but less than $628.33: Any amount above $471.25 may be garnished. | If you earn more than $942.50 but less than $1,256.66: Any amount above $942.50 may be garnished. |
| If you earn more than $290.00 the maximum that can be garnished is 25%. | If you earn more than $580.00 the maximum that can be garnished is 25%. | If you earn more than $628.33 the maximum that can be garnished is 25%. | If you earn more than $1,256.66 the maximum that can be garnished is 25%. |
Source: 15 USC 1673: Restriction on garnishment (house.gov)
If a state wage garnishment law differs from the amount set by the CPPA, the applicable law is the law resulting in the lower amount of earnings being garnished.
As discussed before, the above limitations do not apply to recover debts due for taxes and certain bankruptcy court orders. Also, different limitations apply to recover debts for alimony or child support. For more information, please visit the page available at Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act’s Title III (CCPA) | U.S. Department of Labor (dol.gov)
States have the power to impose stricter limits on the amount that can be garnished from your paycheck. Thus, state laws may provide greater protection than the CCPA. While some states follow federal guidelines, other states set a lower percentage limit that is subject to garnishment.
WHAT STATES HAVE GREATER PROTECTIONS ON WAGE GARNISHMENTS?
As discussed above, not all states follow the federal wage garnishment rules. Some states use their own rules on wage garnishment and other states use federal laws with some exceptions. Additionally, 4 states do not allow wage garnishment for consumer debt at all. These states are Texas, South Carolina, North Carolina, and Pennsylvania.
For example, North Carolina does not allow a creditor with a money judgment against a debtor to garnish their wages. However, a creditor in North Carolina may collect specific debts such as unpaid income taxes or alimony using wage garnishment. You can find more information here G.S. 105-242 (ncleg.net)
In addition, in Texas, according to the Texas Constitution, Article 16, (THE TEXAS CONSTITUTION ARTICLE 16. GENERAL PROVISIONS), creditors are not allowed to garnish your wages except for court-ordered child support payments or spousal maintenance. However, debtors are required to comply with garnishment orders for federal debts such as unpaid taxes or student loans. But there are no garnishment orders for consumer debts.
But, if a debtor works for an out-of-state company or receives wages from a source outside of Texas, a creditor may serve a wage garnishment order in that other state and thus, be allowed to garnish your wages.
If you find yourself in this situation it is important to get an attorney’s advice to learn about your rights.
WHAT PROPERTY IS EXEMPT FROM GARNISH?
Although depending on the debtor’s individual circumstances, federal benefits may not be garnished.
- Social Security benefits,
- Veterans’ benefits
- Supplemental Security Income benefits,
- Federal Emergency Management Agency (“FEMA”) disaster assistance,
- Disability benefits
- Federal retirement and civil service benefits, and
- Survivor’s benefits and military annuities.
Attorney Mathew Higbee, who represents clients who are dealing with financial challenges, says that there are ways to fight to stop or reduce garnishments. “The key is to act fast by challenging the judgment or the amount of the garnishment. Each state has procedures to protect people from overreaching creditors.”
Please do not hesitate to contact us for a free evaluation on how to deal with your garnishment.
During our debt relief program, creditors may pursue to garnish your wages but remember that in most cases a creditor is not able to garnish your wages without getting a judgment from the court first. The assigned attorney to your case will help you to take all the measures to stop the garnishment or, if you qualify, claim an exemption with the court.
