Wage Garnishment Laws

As a credit attorney, I often get calls from clients about wage garnishment laws and how the laws can affect them. Usually, a client will call after receiving a writ of garnishment from their employer or from their bank. The most common questions are "how do wage garnishment procedures work?" And "how can I avoid wage garnishment?"

Two Forms of Garnishment

First of all you should know that there are two forms of garnishment: wage garnishments and non-wage garnishments. A wage garnishment is when a creditor gets a judgment and determines you are gainfully employed with sufficient income to pay a portion of your paycheck toward the judgment.

An example of nonwage garnishment is when a judgment holder attempts to garnish money from your bank account. In either case a writ of garnishment (a fancy legal term meaning a court order) is served upon your employer and/or your bank, requiring them to take your money and pay it to the judgment holder.

Although both State and Federal wage garnishment laws regulate garnishments, the Consumer Credit Protection Act is the primary Federal law that governs your Federal rights regarding garnishments.

• Your employer is prohibited from firing you simply because your wages are garnished. However, if a 2nd or 3rd such judgment occurs, that protection may no longer apply.
• Certain funds are exempt from wage garnishment. For example, certain payroll deductions like federal and state taxes, unemployment taxes, and social security payments are exempt. However, deductions that are not required by law (e.g. health insurance or union dues) may not be protected from wage garnishment.
• State and Federal laws regulate the amount of money that can be garnished from your paycheck or bank account. The purpose is to leave you with some money to survive on.

There Is a Limit to Garnished Wages

According to the U.S. Department of Labor, Title III of the Consumer Credit Protection Act "also protects employees by limiting the amount of earnings that may be garnished in any workweek or pay period to the lesser of 25 percent of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage prescribed by Section 6(a)(1) of the Fair Labor Standards Act of 1938. This limit applies regardless of how many garnishment orders an employer receives."

Here's an example of how it works. Let's say you net $800 per week. Under the 25% of net pay calculation, your paycheck could be garnished $200 ($800 x 25%). However, under the 30 times the federal minimum hourly wages calculation, your paycheck could be garnished $582.50 (30 x the minimum hourly wage of $7.25 is $217.50 which is then subtracted from the net pay of $800).

But the lesser of the two garnishment methods is the $200 amount. So $200 would be the most they can garnish from your paycheck no matter how many writs of garnishment have been served on your employer.

Garnishment Policies Vary from State to State

However, garnishment policies can vary from state to state and from bank to bank, so it's very important to check your state's wage garnishment laws. Some states prohibit wage garnishment. However, every state allows garnishment for taxes and child care. You need to know the state wage garnishment laws for the state in which the debt was incurred. Remember, debts are often sold to collectors in other states.

Wage garnishment is obviously a very serious matter. It affects both your credit and your finances. So the best strategy is to learn how to avoid wage garnishment altogether. If necessary, contact a good consumer law attorney in your state for help.