It is always upsetting when you are notified by a court that your wages are going to be garnished due to unpaid child support or some other form of unpaid debt. The payroll firm ADP reported that about 13 million employees had wage garnishments in 2013 with the top reasons being child support, consumer debts, student loan debt and tax levies.1 A more recent report by Neighborhood Trust Financial Partners reports nearly 9.5 million Americans with wage garnishments.2
There are bankruptcy options available that may stop wage garnishment from happening.
With the economic hardships created by the pandemic, this number is sure to grow, so it is important to understand what wage garnishment is, your rights if your wages are being garnished, and how you might be able to stop your wage garnishment altogether.
Investopedia defines a garnishment, or wage garnishment, as “when money is legally withheld from your paycheck and sent to another party. It refers to a legal process that instructs a third party to deduct payments directly from a debtor’s wage or bank account.”3 You can’t be fired if your employer receives one order to garnish your wages.
The wage garnishment provision of the Consumer Credit Protect Act (CCPA) protects you from getting fired and also sets a limit on how much money can be deducted from your paycheck each week.4 The CCPA doesn’t protect you from being fired for more than one wage garnishment.
The amount of your wage garnishment depends on the type of debt. For example if you have federal student loan debt, 15 percent of your wages can be garnished after the necessary deductions are taken for taxes and social security. The Internal Revenue Service (IRS) can also take up to 15 percent of your wages for tax debt, but will determine the amount garnished based on standard deductions and the number of dependents you have.
Credit card debt, medical bills and other consumer debt garnishments will be either 25 percent or the amount by which your weekly income exceeds 30 times the federal minimum wage (currently at $7.25 per hour), whichever is less. How this works is a bit complicated. If you make less than $217.50 a week your wages are exempt from garnishment. If you make between $289.99 and $217.51, the amount above $217.51 can be garnished. If your weekly income after taxes and social security payments is $290 or more, the garnishment will take 25 percent of your wages.
The largest wage garnishments allowed are for child support and alimony payments. Your wages can be garnished by 60 percent unless you are supporting another child or spouse and then you can be garnished only 50 percent. If, however, you are more than 12 weeks late on your payments, an additional 5 percent may be taken. These are just general guidelines, as state garnishment laws vary. The IRS doesn’t need a court order to garnish wages for a tax levy, but typically a creditor has to obtain a court order for a garnishment of wages or a bank account. Having a garnishment is bad on an individual’s credit rating.
If you feel that your garnishment is unfair or illegal you can submit a complaint to the Wage and Hour Division.5 Generally you have a right to a written notice and hearing before your wages are garnished but there is a limited time, usually five days to a month, to raise an objection, which is best done by working with a lawyer.
Filing for bankruptcy is another way to halt wage garnishment. If you file a Chapter 13 bankruptcy a court order, called an automatic stay, goes into effect. All garnishments will stop, but you will have to pay your debts over a three-to five year period based on the bankruptcy plan. If you file a Chapter 7 bankruptcy, debtors can continue with wage garnishments.
If you are facing wage garnishment, it is best to seek professional legal advice to determine your best course of action. A bankruptcy attorney has experience in dealing with garnishments and can provide expert advice on your rights and your options. #####
A bankruptcy attorney from Hines Law in Massachusetts can help to immediately end most garnishments of wages. Don’t let your overwhelming debt control your life when income is tight. Our Bankruptcy Law Firm has been helping clients regain control of their finances with the right debt solution for 20 years. Call for a Free Consultation today!
1 Wage Garnishment: How It Works and What You Can Do, by Sean Pyles, 9/12/2019
2 What is Wage Garnishment? by Robin Madell, 8/17/2020
3 Garnishment by Julia Kagan, 11/12/2020
4 Federal Wage Garnishments
5 Wage and Hour Division: Resources for Workers