Wage garnishment is a legal process that allows a creditor to collect a debt by deducting a portion of a debtor's wages directly from their paycheck. Employers are not always aware of their responsibilities when they receive a notice to garnish their wages from a court, a state, or a federal agency. Your employer must understand their obligation under the applicable statutes upon receiving a wage garnishment order because failure to adhere to the order could attract penalties and fines.
There are several forms of wage garnishments and laws governing payroll calculations. Your situation could become increasingly complicated if you have multiple garnishments. However, you can avoid unpleasant surprises when you understand what to expect. Below are some of the things that you need to know about wage garnishment.
The Meaning Of Wage Garnishment
Garnishment of wages is an equitable or legal process where your employer withholds some portion of your income to pay your debts. Typically, a government agency action or court order initiates a payroll garnishment. A government agency's action, like an IRS levy, can demand that your employer withhold a percentage of your compensation. Once your employer receives an order to garnish your wages, the employer is lawfully obligated to make the proper deductions from your wages and channel the payments to a designated creditor or agency.
How Wage Garnishment Works
You probably must fulfill some mandatory payments, even if it is often up to you to decide how to manage your finances. Some of these responsibilities, like federal and state taxes, are automatically deducted from your paycheck. At times, however, you can fall behind on other financial contributions.
If you have a financial obligation or a debt you have not fulfilled, a creditor can take legal action against you. The creditor can go to court and request an order to have your wages garnished. Depending on your debt type, a government agency or the court can issue a wage garnishment order. The government agency or the court will send a "writ of garnishment" to your employer, informing them of the wage garnishment.
The laws governing wage garnishment allow your employer to withhold a specific amount from your income until you no longer default on your debt. The following are the factors considered when calculating the percentage deducted from each paycheck:
- Your total income.
- The period you have defaulted.
- The type of debt.
- Your total debt.
The Wages To Be Garnished And A Limit To The Amount Garnished
Title III of the Federal Consumer Credit Protection Act (CCPA) guides the garnishment of wages in the U.S. Under the law, your wages can only be garnished based on disposable income. The disposable income consists of your total compensation minus mandatory deductions, including local, state, and federal taxes. Generally, it includes commissions, bonuses, wages, and retirement income. The legal deductions will consist of the following:
- Local income tax.
- Federal income tax.
- Medicare tax and additional Medicare tax.
- State income tax.
- Social security tax.
However, the amount of garnished wages in most cases varies depending on the requirements of the garnishment order. Usually, the amount is around 15 percent for a student loan and 65 percent of your disposable income for outstanding child support.
Employers are required to adhere to the state statutes requiring a lesser wage garnishment. This is only a requirement where statutes differ from the federal wage garnishment statutes. Fortunately, irrespective of your debt level, you will always have sufficient income to cater to your daily needs after wage garnishment.
If the garnished wages are not used to maintain a person or family, the lesser of the following two amounts is the cap:
- 25% of your disposable income for the week.
- 50% of the amount by which your weekly disposable income is above 40 times California's hourly minimum age. Currently, the hourly minimum wage in California is $14. If you live in an area where the local minimum age is higher than the state minimum wage, the wage garnishment calculations are done using the local (higher) minimum wage.
According to Title III, wage garnishment for supporting a family or an individual can be made as follows: 50% of your disposable income is deducted if you support an unprotected child or spouse. Some garnishment orders, like tax debts or bankruptcy orders, are not affected by the limits.
If a debtor has multiple creditors seeking wage garnishment, the total amount deducted from their wages cannot exceed the maximum limits set by California law. The law prioritizes certain types of debts, like child support, over other debts when multiple garnishments are involved.
The Common Types Of Wage Garnishment
Several situations could trigger wage garnishment. The common ones are:
Garnishment From Court Judgments
Most types of wage garnishment fall under court judgments, including lawsuits, medical bills, and consumer debt, since they require a court order to be enforced. A creditor sues you, requesting the court to garnish your wages. The court summons you for a hearing and orders you to pay the debt you owe if the Judge sides with the creditor. If you fail to pay the amount you owe or attend the court hearing, conditions could be set for garnishment, and the court will enforce the order.
Under court judgment, the maximum amount that can be garnished is 25 percent of your disposable weekly wages. However, this could vary depending on the terms agreed upon during the court hearing. Wage garnishment laws vary. Therefore, you should understand your local statutes. You must note that you can avoid wage garnishment by cooperating with your creditors and letting them know your financial situation.
Garnishment For Federal Student Loans
Federal student loans usually attract a garnishment that does not exceed 15 percent of your disposable income. Generally, federal student loans do not need a court order. If you fail to pay your debt, your wages can be garnished without court notification.
The U.S. Department of Education or the school to which you owe money will serve you a letter before garnishing your wages. They will also serve you a 30-day notice, informing you of the repercussions you will face for not paying your debt. In this case, you should reply to the letter and have the matter heard in court. However, the school will garnish your wages without your approval if you fail to respond to the letter. The only way to prevent this is to communicate with the school and agree on a repayment plan or negotiate with the guarantor of your debt.
Garnishment For Alimony And Child Support
Under California law, 50 percent of your disposable income could be committed through garnishment if you are supporting a spouse, a child, or another person recognized under the law. This amount could be as high as 60 percent if you are not supporting anyone else. If you delay making your payment for a period that exceeds 12 weeks, then 5 percent will be added to the amount subject to garnishment. In this case, your child support payments could cost you 65 percent of your wages.
Generally, for all other types of garnishment, you are only supposed to commit 25 percent of your weekly disposable income. Unfortunately, child support matters are an exception. This is the reason why it attracts a higher percentage than other garnishments.
After enacting the Family Support Act of 1988, all modified or new child support orders must have wage withholding conditions. When the court finalizes its orders on child support debt, the court or the child's other parent will serve your employer with copies of the order. If the court orders you to contribute to or pay for your child's health insurance, the court could also impose a garnishment on your wages.
Garnishment For Income Taxes
The IRS can garnish up to 15 percent of your disposable income, depending on the number of dependents you have and the deductions available to you. The IRS does not need to secure a court order to deduct this amount, and they will serve you with a letter explaining the situation to you. They will explain all the circumstances surrounding your debt, including alternatives to wage garnishment. You can reach out to the IRS and try to reach an agreement to avoid wage garnishment. The state can also garnish wages for local taxes and owed state taxes. These statutes are specific to every state, so you must understand the state statutes about garnishment.
You Can Object to Wage Garnishment
You can challenge a wage garnishment by objecting if a creditor attempts to garnish your wages. The steps you must follow to object to a wage garnishment depend on the applicable statutes and the type of debt the creditor is trying to collect from you.
Typically, the procedure for objecting to a wage garnishment starts with preparing and filing paperwork. You must highlight this in your written objection if your income is wholly or partially exempted under state or federal law. You can also claim that you have secured a bankruptcy discharge or have already cleared with your creditor.
Accessing Instructions For Objecting To A Wage Garnishment
The court will always serve you with garnishment papers containing guidelines on what you should do to object to your wage garnishment. If you do not find the instructions in the garnishment papers, you should contact the court clerk to inquire about the instructions.
The garnishment notice accompanies a form that you can use to write your objection and ask for a hearing. If you do not find the form, request one from the court clerk that served you with a garnishment notice. You can also write your objection and file it on your own time if the court does not have the form. You could waive your right to challenge the wage garnishment if you do not have valid reasons for objecting to the garnishment. You will also waive your rights if you fail to file the written objection on time and with the right court.
The Wage Garnishment Hearing
Before wage garnishment occurs, the debtor must receive a notice informing them about the impending garnishment. The notice should include the amount owed, the right to request a hearing, and the process for claiming exemptions. Debtors have the right to contest the garnishment and request a hearing within a specified timeframe.
Once the court schedules a garnishment hearing, you must appear in court to object to the wage garnishment. The following could happen after the hearing:
- The Judge could overrule your objection and allow the garnishment to continue.
- The Judge could sustain or accept your objection and dismiss or reduce the wage garnishment.
You Can Stop a Wage Garnishment
Several options are available for you to stop a wage garnishment, including:
Filing For Bankruptcy
You can file for bankruptcy if your financial situation is extreme, and bankruptcy will assist you in stopping your wage garnishments. Bankruptcy stops wage garnishments and can erase some of your debts.
A court order known as an "automatic stay" will take effect once you file a bankruptcy case. This order prevents most creditors from taking your property or continuing recovery actions to collect debts, including stopping or avoiding a wage garnishment and discarding the underlying debt. However, an automatic stay is a powerful tool, but it is not absolute. If you have filed for bankruptcy repeatedly, the automatic stay will last only 30 days. At times, the automatic stay is not implemented despite filing for bankruptcy.
The Limits Of Bankruptcy On Wage Garnishments
Bankruptcy cannot stop all wage garnishments since the automatic stay does not apply to all types of debts or all creditors. For example, the automatic stay cannot prevent a garnishment if the following is true:
- You file a Chapter 7 bankruptcy.
- Your debt is for domestic support duties like alimony or past-due child support.
Additionally, because domestic support duties are not discharged in bankruptcy, the creditor cannot halt wage garnishment when Chapter 7 is on hold, and many bankruptcy courts will not order it.
Filing For Exemption
You can protect or exempt some or all of your wages if you receive a wage garnishment notice. You could do so by filing an exemption claim with the court. Wage garnishment exemptions are generally wage protections that restrict your creditors from taking a certain amount or more than the designated amount of your income. The aim of filing for exemption is to help you protect some income from your creditors to pay for living costs.
The amount that you can exempt varies depending on the local statutes. You can fully or partially protect your income, depending on your situation.
Some types of wages are fully exempt, although exceptions exist. Typically, ordinary creditors have no powers to garnish the following types of income:
- Alimony.
- Child support.
- Retirement.
- Disability.
- Social security.
However, it is essential to note that creditors could still freeze the funds in a bank account where exempt income is deposited. Unless you claim an exemption, wages are almost often subject to garnishment. However, you can keep all your wages as a low-income debtor. On the other hand, individuals who earn higher wages are likely to lose part of their income.
You Cannot Lose Your Job Because Of Wage Garnishment
According to CCPA provisions, your employer cannot terminate or discipline you because of a solitary debt and wage garnishment. However, CCPA provisions and federal laws cannot extend your protection if you have several wage garnishments.
However, some laws give your employer the power to seek reimbursement from you for administrative expenses associated with excessive garnishments. Additionally, certain wage garnishments, like child support, allow for similar rules that permit your employer to recoup administrative costs. States' laws differ regarding the limits on the maximum amount of the administrative fee that can be deducted.
How Long It Takes to Release a Wage Garnishment
There is no standard period for how long it takes to release a wage garnishment because of several variables. These variables include the following:
- The amount of money you make.
- The amount of money you owe the creditor.
- The garnished amount.
The release can be after any of the following:
- When you are no longer in default.
- When your employer receives notification that the garnishment order is over.
- When you repay the outstanding debt in full.
Protection for Low-Income Debtors
California laws provide additional protection for debtors who earn a low income. If the debtor's earnings are less than 40 times the state minimum wage per week, their wages are generally exempt from garnishment, except for certain types of debts like child or spousal support.
Employer Responsibilities
Employers are legally obligated to comply with wage garnishment orders. Once they receive a garnishment order, they must withhold the specified amount from the employee's wages and remit it to the creditor. Failure to comply with garnishment orders can result in penalties for the employer.
Find a Bankruptcy Attorney Near Me
Perhaps you are facing wage garnishment or have specific questions regarding your situation. It is advisable to consult with a qualified attorney or a legal professional who can provide personalized advice based on your circumstances. At the Los Angeles Bankruptcy Attorney, we have skilled attorneys who can help you understand wage garnishment, including how to get around it. Contact us at 424-285-5525 to speak to one of our attorneys.
