You've just been notified that your paycheck is about to be garnished. Don't panic!
Your paycheck is already too little. The government takes a bite. Child support takes a bite. And now your creditors are coming to take some more bites.
What to do? What does "wage garnishment" even mean?
Here are some options you might have to stop a wage garnishment, too ...
Wage Garnishment Table of Contents
Wage Garnishment Definition
A "wage garnishment" or a "wage attachment" is a court order requiring your employer to withhold a certain amount of money from your paycheck. This money then goes directly to your creditors.Creditors typically can't garnish your wages without getting a judgment from the court. Creditors must do this correctly, too.
>> Note: Creditors have to follow your state's correct court procedure to garnish your wages. This includes proper notice, venue, etc. More on that later ...
Wage Garnishment Examples:
Let's say you fall behind on credit card payments or doctor's bills. These are your creditors. They can't take your wages (garnish you) unless they file a lawsuit, win the lawsuit, get a judgment, then file the judgment.
Who can do a wage garnishment without filing a lawsuit?
However, there are some creditors that can garnish your paycheck without filing suit first. If you owe taxes, federal student loans, child support, or alimony, your creditor is typically the government. In these cases, the government doesn't have to sue first. They just start garnishing. These creditors have a statutory right to take money directly out of your paycheck or your tax refund.
Okay, so how much can these creditors actually take in wage garnishment?
How much can creditors garnish (seize) from your paycheck?
Creditors can't seize all of the money in your paycheck. Thankfully.
It's important to know how much can be taken out of your paycheck, because sometimes your office just doesn't understand this part. You may even be un-garnishable.
Different rules and legal limits determine how much of your pay can be garnished. Federal law limits the garnishment amount to 25% of your disposable earnings for that week.
So how do you calculate your disposable earnings and the amount of a wage garnishment?
Your disposable earnings are what's left of your paycheck after mandatory deductions. So how much of what's left can be taken? Can be garnished?
The amount of the garnishment can be calculated in two ways. The garnishable amount is the LESSER of the two following calculations, according to 15 U.S.C. § 1673:
- Method #1: 25% of your disposable earnings, or
- Method #2: The amount by which your disposable earnings for that week exceed 30 times the federal minimum hourly wage.
Example Wage Garnishment Calculations, First Scenario ...
Let's say you made $400 last week. Of that $400, $200 is subject to mandatory deductions. Your disposable earnings are $200.
Example calculation for Method #1: They can only take 25% of your disposable earnings per week. 25% of $200 is $50. Only $50 can be garnished.
Make sense? Okay, now let's see if the second method is less than $50. If it is, the lesser amount will be garnished.
Example calculation for Method #2: Federal minimum hourly wage is $7.25. 30 times federal minimum hourly wage is $217.50. $217.50 is greater than $200. Your disposable earnings do not exceed 30 times the federal minimum hourly wage. Your garnishable amount is $0.
The lesser of $50 and $0 is ... $0. You cannot be be garnished.
Example Wage Garnishment Calculations, Second Scenario ...
Let's tinker with the above calculation a little bit. Let's say you still made $400 last week, but of that $400, only $100 is subject to mandatory deductions. Your disposable earnings are, therefore, $300.
Example calculation for Method #1: They can only take 25% of your disposable earnings per week. 25% of $300 is $75. Only $75 can be garnished.
Make sense? Okay, now let's see if the second method is less than $75. If it is, the lesser amount will be garnished.
Example calculation for Method #2: Federal minimum hourly wage is $7.25. 30 times federal minimum hourly wage is $217.50. This time around your disposable earnings are greater than $217.50. Your disposable earnings exceed 30 times the federal minimum hourly wage. $300 minus $217.50 is $82.50. Your garnishable amount is $82.50.
The lesser of $75 and $82.50 is ... $75. You will be garnished according to Calculation #1. The maximum amount you can be garnished is, therefore, $75, the lesser of the two calculations.
Wage Garnishment Exemptions and Limits: Federal Law
Garnishment Limit for Federal Student Loans in Default
If you stop paying on your federal student loan(s), you'll enter a phase called default. If you're in default on a federal student loan, the U.S. Department of Education or any other entity collecting for this agency can garnish your wages. Up to 15% of your pay can be garnished to repay your student loans, according to 20 U.S.C. § 1095a(a)(1).
This kind of wage garnishment is called an "administrative garnishment."
Again, as described above in detail, you can keep an amount equal to 30 times the current federal minimum wage per week. Federal law protects the amount of your income equal to 30 times the federal minimum wage per week from garnishment, per 15 U.S.C. § 1673.
Garnishment Limits for Unpaid Taxes
If you owe back taxes, the federal government can garnish your wages. This can be done without a court judgment. This is called a "levy."
The weekly exempt amount is based on the total of the taxpayer's standard deduction and the total amount of the taxpayer's personal exemptions. The pay left over is then divided by 52.
If you don't verify the amount of your standard deduction based on how many dependents you can claim, the IRS will just calculate your exemption based on the standard deduction for a married person filing separately, with only one personal exemption, as described in 26 U.S.C. § 6334(d).
State Law Modifications to the Wage Garnishment Calculation
Federal law (what we were discussing above) provides an upper limit to your wage garnishment. State laws can't raise this cap, but they can lower it. That is to say, state law can give you some extra relief. Some states set a lower percentage limit for wage garnishment.
How long until the wage garnishment starts? State law also typically provides a grace period after the garnishment order is received. Mississippi law provides you with a brief grace period.
Check out Debt Reduction 101's state-by-state guide for Wage Garnishments.
How Long does a Wage Garnishment Last?
Creditors will continue to garnish your wages until (1) the debt is paid in full, or (2) you stop the garnishment.
How Do You Stop a Wage Garnishment?
So, how do you stop a garnishment? There are a lot of options here. Here are some possibilities for stopping a garnishment:
- You could claim an exemption with the court. Your state's exemption laws determine the amount of income you'll be able to retain. Depending on your situation, you might be able to partially or fully keep your money.
- You could stop most garnishments by filing for bankruptcy.
- You could dispute the debt yourself.
- You could negotiate a settlement with the creditor.
- You could hire an attorney to do all the above, to dispute the debt, negotiate a settlement, delay the garnishment, etc.
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