Facing Wage Garnishment? How To Protect Your Paycheck

If you have unpaid debts such as credit card bills, child support, or federal tax debt, you may be facing wage garnishment to pay off your debt. Creditors can get a court judgment and garnishment order to require your employer to take money from your paycheck to apply toward unpaid debts. If you get notice of a garnishment order, you may need to act quickly, such as by filing an objection, a claim of exemption, or a motion in the case, to try to stop or reduce the wage garnishment and protect your earnings.

You can file a claim of exemption or show financial hardship to reduce the garnishment amount. The process for wage garnishment, maximum withholdings, and amount of exemptions vary by state. To protect your paycheck from creditor claims, talk to a local creditor-debtor rights lawyer.

How Does Wage Garnishment Work?

Wage garnishment is a legal action where the court issues an order to your employer to withhold a certain amount of your paycheck to pay off debt. If you owe back child support or defaulted on a credit card, the creditor files a claim in civil court for judgment.

After getting the judgment, the creditor can file a garnishment order with the employer to make the required deductions to pay off outstanding debts.

Wage garnishment is not optional for employers. When an employer receives a garnishment court order, they are required to withhold the amount and make payments available to the creditor. If an employer does not garnish the employee’s take-home pay, they can face financial penalties, including fines and interest.

Even if you are no longer working, some government benefits can be withheld or offset to pay certain debts. For example, certain Social Security benefits can be subject to withholding for limited categories of debts, and some veterans’ benefits have strong protections from most creditor claims.

However, the withholding or offset of government benefits is usually limited, and it commonly involves child support, alimony, certain federal taxes, and some other federal debts that can be collected through federal offset programs.

When Is Garnishment Available?

In most states, a judgment creditor can often garnish wages for many types of consumer debts, such as credit card bills, medical bills, and personal loans. Taxes and many student loan collections can follow different procedures and may not require a typical civil court judgment.

However, the most common source of wage garnishment is for child support payments. Some states provide stronger debtor rights legal protections for certain types of debts.

A few states generally restrict wage garnishment by private creditors for ordinary consumer debts. For example, North Carolina, South Carolina, Texas, and Pennsylvania have significant limits. However, wages can still be taken for certain debts, such as child support, alimony, and many federal and state tax obligations.

Federal law can allow wage garnishment for defaulted federal student loans even where state law would otherwise restrict it.

Limits on Wage Garnishment

There are limits to how much a creditor can take out from your paycheck under state and federal law. Under federal law, the maximum amount that creditors can withhold from your paycheck is the lesser of:

• 25% of your disposable income
• Amount at which your disposable income exceeds 30 times the federal minimum wage ($7.25 per hour)

For example, if you work 40 hours per week earning $7.25 per hour (for a total of $290 per week), the maximum wage garnishment amount is the amount your income exceeds 30 times $7.25 ($217.50), for a maximum garnishment of $72.50 per week.

If you have a weekly disposable income of $2,000 per week, the maximum garnishment amount is 25%, or $500 per week.

Your disposable earnings are the amount left after making legally required deductions, including income tax withholdings, Social Security, and unemployment insurance. This does not include optional deductions for things like health insurance and retirement contributions.

Stopping Wage Garnishment

You may have a better chance of avoiding wage garnishment before it starts than reversing it after the creditor submits a court order to your employer.

Instead of ignoring your creditors, consider negotiating to get more time to pay off your debt and avoid automatic deductions. You can try to negotiate a lump-sum payment, a monthly payment plan, or ask for a reduced interest rate or lower monthly payment to make repayment more manageable.

If you get a wage garnishment notice, you must act quickly to stop the paycheck deduction. You can file a claim of exemption to stop garnishment or limit how much is taken from your take-home pay.

Filing a Claim of Exemption To Stop or Limit Wage Garnishment

In a claim of exemption, you can show the garnishment amount exceeds the allowable percentage of your disposable income.

You can also make a financial hardship claim to show you need the disposable earnings to provide for the basic needs for you and your family. Provide evidence to justify your claim of exemption, including financial records, your credit report, pay stubs, and bills.

If your claim of exemption is granted, or if the creditor does not timely object and the court allows the exemption, the garnishment may be reduced or stopped. If the creditor objects, they will generally provide a reason for the opposition. You can then take your exemption claim before a judge to determine the garnishment amount.

Stop Collections Actions with a Bankruptcy Filing

When you file for Chapter 7 or Chapter 13 bankruptcy, it usually triggers an automatic stay that stops many collection actions. But there are important exceptions, including for many child support and alimony actions, and certain tax and governmental proceedings.

An automatic stay means debt collectors have to stop trying to garnish your wages, levy your bank accounts, or seize your assets. Filing for bankruptcy is generally the last option for debtors who need help getting out from under consumer debt so they can get a new start.

Chapter 7 bankruptcy involves liquidating your non-exempt assets to pay off creditors, which discharges the majority of your debt after completing bankruptcy. Chapter 13 bankruptcy involves negotiating a repayment plan with your creditors so you can keep your assets while benefiting from an automatic stay against wage garnishment.

Bankruptcy will not resolve all debt issues. Bankruptcy generally does not discharge debts from child support, alimony, federal student loans, or government tax debts. Talk to a bankruptcy attorney about whether bankruptcy is a good debt relief option for your situation.

Get Legal Advice To Deal with Wage Garnishment

It is simpler to stop wrongful wage garnishment from starting than to recover money taken out for an improper court judgment. The debt collector may have gotten a default judgment for a debt you already paid, taken out more than they should, or made a claim on an expired judgment. Talk to an attorney for help dealing with a wrongful garnishment.

A debtor rights lawyer can review your situation and provide legal advice to stop the wrongful garnishment order. If you did not get proper notice or the claim has expired, your attorney can file a motion to vacate the judgment or garnishment order. Your attorney can represent you in court to stop the garnishment order and recover improperly withheld earnings.

In some cases, your attorney can also recover damages, including legal fees for the cost of taking legal action. To protect your paycheck against unfair wage garnishment, talk to a creditor-debtor rights attorney.