What’s garnish?
Wage garnishment deducts money from your paycheck and sends it to another party. A legal process that directs a third party to deduct payments from a debtor’s paycheck or bank account
The garnishee is usually the debtor’s employer. Employers cannot fire workers to avoid garnishment payments under federal law. Garnishments cover debts, including delinquent taxes, penalties, child support, and student loan defaults.
Garnishment Process
A creditor needs a court order to garnish a debtor’s wage if they owe and have defaulted. Internal Revenue Service (IRS) debts do not require judicial orders.2 The IRS can garnish his salary if John Smith owes $10,000 in delinquent taxes.
To pay Smith’s taxes, the IRS would order his employer to withhold a percentage of his wages for a specific period. Because garnishments are the final alternative to collecting debts and indicate a debtor’s poor repayment history, they can hurt credit.
Wage garnishment
The Consumer Credit Protection Act limits pay garnishments. The amount is the lowest of the:
If discretionary income exceeds $290, 25% of weekly disposable income
Anything above 30 times the weekly minimum pay of $217.50 ($7.25 x 30)
People earning less than $217.50 weekly are not subject to wage garnishment. Weekly disposable income between $217.50 and $290 might result in garnishment of amounts exceeding $217.50. Garnish a maximum of 25% on weekly disposable earnings exceeding $290.
Gross income less federal, state, and local taxes and social security deductions is disposable income.
Special Considerations
The Consumer Credit Protection Act garnishment restrictions do not apply to delinquent taxes, child support, bankruptcy decrees, student debts, or voluntary salary allocations. Federal agencies and student loan borrowers can garnish 15% of their wages.
A person with no other dependents can take 60% of their salary for child support payments. If federal and state garnishment limitations differ, the lesser limit applies. Wage garnishment can cause financial hardship, but a claim might lessen the garnishment amount.
Conclusion
- A garnishment orders a third party to seize assets, generally wages or bank account money, to pay off a debt.
- The IRS can garnish earnings without a court order.
- Except for unpaid taxes, late child support, bankruptcy orders, defaulted student loans, and voluntary wage assignments, the Consumer Credit Protection Act prohibits wage garnishments.
- Financial hardship may qualify the debtor for relief.
