Learn How Much of Your Wages Can Be Garnished
Wage garnishment rules can be confusing and a bit overwhelming at first glance. The rules are a little less daunting if you look at each one at a time. This article breaks down wage garnishment rules, gives examples of how much can be garnished, and explains what happens if you face more than one garnishment simultaneously.
Wage garnishment is a way to collect money a court awarded in a judgment, but remains unpaid. A court orders an employer to take — or “garnish” — a portion of an employee’s earnings to pay the person to whom the debt is owed. Many states consider “earnings” as compensation for personal services, including wages, salary, commission, and bonuses. In some states, periodic payments from a pension or retirement program are considered earnings and are subject wage garnishment. Some states consider contract employees (1099 workers) as employees for the purposes of wage garnishment, and other states do not. In all states, creditors may not garnish Social Security benefits.
Federal Wage Garnishment Rules
All state and federal courts must follow federal law called the Consumer Credit Protection Act (CCPA) when setting the maximum amount that can be garnished (15 U.S.C. 16730). States legislatures are free to create laws limiting wage garnishment, which we discuss ahead. Under federal law, the lesser of the following may be garnished:
- Weekly disposable income is more than 30 times the minimum wage (currently $217.50)
- 25% of disposable income where weekly disposable income is $290 or more
We clarify both of these rules in the example table ahead. “Disposable income” is the income left after all legally required deductions are taken from a person’s paycheck. This include federal and state taxes, FICA, state unemployment and disability taxes. Other obligations, such as voluntary contributions to retirement accounts, deductions for medical, dental, or vision insurance, or contribution to a Medical Savings Account are not exempt and will be considered part of the disposable income.
There is an exception to the 25% rule when child support is involved. The CCPA allows up to 50% of an employee’s disposable earnings to be garnished for child support if the employee is supporting a current spouse or child, who is not the subject of the support order, and up to 60% if the employee is not doing so. An additional 5% percent may be garnished for support payments over 12 weeks in arrears.
As of late 2012, the US minimum wage is $7.25 an hour, making the 30-hour weekly total $217.50. Therefore, if disposable earnings are more than $217.50 but less than $290.00 ($7.25 × 40 hours), the amount greater than $217.50 can be garnished.
The Dept of Labor created the following five examples to illustrate the amounts subject to garnishment. Bills.com reformatted the examples into this table to clarify the explanations.
|5 Example Situations Involving Wage Garnishment||Math||Take-Home Pay|
|1||Employee’s gross earnings in a week are $263. After deductions required by law, the disposable earnings are $233.||$233 [disposable earnings] - $217.50 [minimum take-home pay] = $15.50 may be garnished||$217.50|
|Only the amount greater than $217.50 may be garnished where the disposable earnings are $290 or less.|
|2||Employee’s gross earnings in a week are $402. After deductions required by law, the disposable earnings are $368.||$368 × 25% = $92 may be garnished||$276|
|Because the disposable earnings are >$290, 25% of disposable earnings may be garnished.|
|3||Employee paid every other week has $500 disposable earnings for the first week and $80 for the second week of the pay period, for a total of $580.||$580 × 25% = $145 may be garnished||$435|
|In a biweekly pay period, when disposable earnings are at or above $580 for the pay period, 25% may be garnished. It does not matter the disposable earnings in one week are less than $217.50.|
|4||Employee on a $400 weekly draw against commissions has disposable earnings each week of $300. Commissions, paid monthly, total $3,000 for a month after deductions required by law. Each draw and the balance due at the monthly settlement are separately subject to the law's restrictions.|| $3,000 [commissions earned] - $1,200 [draw] = $1,800 |
$1,800 × 25% = $450
|Here, 25% of each draw ($75 in this example) may be garnished. At the end of the month, the $1,200 previously drawn is subtracted from the $3,000 settlement figure, and 25% of the balance may be garnished.|
|5||Employee has $295 disposable earnings. Employer is already withholding $90 per week due to a child support garnishment order, resulting in $205 take-home pay. A garnishment order for the collection of a defaulted student loan is now served.||$295 × 25% = $73.75||$205|
|No withholding for the defaulted student loan is permitted. The 25% limit for garnishments applies to the outstanding student loan. Here, under the formula for normal garnishments, a maximum of $73.75 is garnishable. The $90 support payments may be withheld, because the normal restrictions do not apply to court orders for support. No withholding for the defaulted student loan is possible because the amount already withheld is more than the amount that may be withheld for normal garnishments. However, additional withholdings are possible for support, delinquent federal or state taxes, and certain bankruptcy court-ordered payments.|
If you are paid weekly, 25% of your wages can be garnished if your disposable earnings exceed $290. The amount is $580 if you are paid every two weeks, $628.33 if you are paid twice a month, and $1,256.66 if you are paid monthly.
Administrative Wage Garnishment & Offset
Creditors must obtain a judgment from a court before they may garnish a worker’s wages. However, Congress gave some federal agencies the right to garnish wages on their own authority (34 C.F.R. Part 34). This is called Administrative Wage Garnishment (AWG). Congress also gave federal agencies the right to intercept federal income tax refunds and Social Security benefits. This is called offset (26 U.S.C. § 6402(d) and 31 U.S.C. § 3720A).
For federal student loans, the Dept. of Education is permitted to use AWG and offset. It can require an employer to withhold up to 15% of an employee’s disposable pay. AWG may continue until a defaulted loan is removed from default status. The CCPA 25% limit applies to student loan administrative garnishment. If you have an existing garnishment at the maximum amount, the Dept. of Education must wait in line until you satisfy your present garnishment(s). See the Bills.com resource How to Stop Garnishment on Student Loans to learn more about your rights and liabilities regarding delinquent student loans.
The Internal Revenue Service calls administrative wage garnishment “levy,” and applies if you do not respond to an IRS Final Notice of Intent to Levy and Notice of Your Right to A Hearing. See the Bills.com resource Garnishment on IRS Debt and Judgment to learn tactics and strategies for resolving and IRS garnishment.
State Wage Garnishment Limits
Texas, Pennsylvania, North Carolina, and South Carolina do not allow wage garnishment for the enforcement of most judgments. In New Hampshire, wage garnishment is not the “preferred” method of judgment enforcement. Although it is possible, wage garnishment is a tedious and time consuming process for New Hampshire creditors.
To learn more about the consumer protection laws in each state, see the Bills.com resource Collection Laws and Statute of Limitations. Consult with a lawyer who has consumer law experience in your state to learn how to apply your particular facts to your state’s wage garnishment laws.
More Than One Garnishment
Generally, garnishments are paid on a first-come, first-served basis. Employers should “stack” the later-served garnishments. Garnishment orders with no expiration date stay in the stack until the garnishment in line before it is paid, and time-limited orders lose their place in line once they expire.
The exception to the first-come, first-served rule are child support garnishments. By federal law, child support has priority over commercial garnishments (42 U.S.C. 666).
If a person has more than one job, his or her wages can be garnished by each employer.
Under the CCPA, a person may not be discharged for having one wage garnishment. Federal law is silent on more than one garnishment. Lawyers infer the CCPA allows employers to discharge an employee if they have more than one garnishment order against them. However, some states, Minnesota for example, outlaw discharging an employee who has more than one wage garnishment order.
Garnishment of Military Pay
The Dept. of Defense complies with legal orders of garnishment for child support, alimony, commercial debt, Chapter 13 and 7 bankruptcy orders, divisions of military retired pay under the Uniformed Services Former Spouses’ Protection Act.
Members of the active duty military are not subject to garnishment for commercial debt, nor are retired military members. However, servicemembers’ pay can be attached through the military involuntary allotment process, which is similar to a wage garnishment in that up to 25% of a servicemember’s pay is subject to attachment (32 C.F.R. Part 112; 113). Judgment-creditors must follow the Dept. of Defense’s involuntary allotment process to, in effect, garnish an active or retired servicemember’s wages.
Filing a Complaint About Garnishment
If you believe your employer is garnishing your wages as a result of an illegal wage garnishment, or is withholding more than the amount allowed by your state law, start with your employer’s payroll office and raise your concerns. If you are not satisfied with the results, file a complaint with the Dept. of Labor under the Fair Labor Standards Act.
How to Handle a Wage Garnishment
A wage garnishment should never surprise a consumer. The details in state laws vary, but all state civil procedure rules require creditors to give consumer notice when they file an action (a lawsuit) against a consumer. Also, many states require a judgment-creditor to give a judgment-debtor notice of a pending garnishment. If a wage garnishment catches you completely by surprise, the judgment-creditor probably did not follow your state's civil procedure rules thoroughly. If this is case, consult with a lawyer in your state who has consumer law or civil procedure experience to discuss filing a motion to dismiss the judgment and block the garnishment.
If you have low or no income, call your county bar association and ask for the names of the organizations in your area that provide no-cost legal assistance. Make an appointment with one of these organizations, and bring all of the documents you have regarding the garnishment and debt to your meeting. A lawyer will explain your rights, and help you draft a motion to dismiss.
If you had notice of the garnishment, some states give the judgment-debtor the right to a hearing before a judge. In some states, the judge is allowed to change the amount of the wage garnishment under some circumstances. Other states do not give judges that power. A lawyer in your state can guide you on this point.
Filing bankruptcy will stop a wage garnishment temporarily or permanently, depending on your circumstances. Again, a lawyer will analyze your facts and advise you how bankruptcy laws and exemptions apply to you.
A judgment-creditor may garnish up to 25% of your disposable earnings if you earn $290 or more per week. The Dept. of Education may garnish up to 15% of your disposable earnings through a process called administrative wage garnishment. If you are delinquent with child support or taxes, more than 25% of your disposable income may be garnished. Guidelines for wage garnishment are federal and found in the Consumer Credit Protection Act, and states are free to create tighter rules. Therefore, learn more about your state’s wage garnishment rules to understand your rights and liabilities.