What is wage garnishment?
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Updated 2:06 p.m. UTC Oct. 24, 2023
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What is wage garnishment?
When an employee defaults on debt or gets behind on other financial obligations, their creditors or other interested parties can take action, such as initiating a lawsuit or pursuing wage garnishment.
“A wage garnishment is a legally mandated process whereby an employer withholds a portion of an employee’s wages to settle a debt or financial obligation. The most common types of wage garnishments are child support and tax levies,” says Kim Robinson, FPC and product manager at BambooHR.
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How does wage garnishment work?
Once a wage garnishment order gets issued, the employer will receive written notification from the court or government. The employer must comply with the order details and begin withholding and remitting a percentage of the employee’s pay to the appropriate entity. The employee will subsequently receive a smaller paycheck.
Types of wage garnishment
Wage garnishment occurs when an employer must withhold and remit a percentage of an employee’s disposable earnings to a creditor. On the other hand, non-wage garnishment, also known as a bank levy, occurs when a creditor can directly seize funds from a debtor’s bank account.
Just as there are funds that can’t get garnished from your pay, certain income is exempt from non-wage garnishment. For example, up to two months’ worth of Social Security or veterans benefits are protected from seizure.
How much can legally be garnished?
Title III of the Consumer Credit Protection Act (CCPA) limits the percentage of disposable earnings that can be garnished per pay period. Disposable earnings are the funds left over after legally required deductions, like taxes and mandatory state retirement system contributions, get taken from an employee’s gross pay.
CCPA limits vary based on the specific situation. Here are several examples:
| SITUATION | DISPOSABLE EARNING PERCENTAGE LIMIT | WEEKLY PAY EXAMPLE | REQUIRED DEDUCTIONS EXAMPLE | MAXIMUM WEEKLY GARNISHMENT AMOUNT |
|---|---|---|---|---|
Defaulted federal student loan
| 15%
| $1,000
| $200
| $120 (15% of $800)
|
Ordinary wage garnishment
| Lesser of 25% or the amount that the employee’s disposable earnings exceed 30x the federal minimum wage of $7.25 ($217.50)
| $1,000
| $200
| $200 (25% of $800) (Disposable earnings of $800 – $217.50 = $582.50)
|
Child or spousal support order with other dependents not on the order requiring support
| 50%
| $1,000
| $200
| $400 (50% of $800)
|
Child or spousal support order with no other dependents requiring support
| 60%
| $1,000
| $200
| $480 (60% of $800)
|
Child or spousal support 12+ weeks in arrears
| Additional 5%; 55% or 65%
| $1,000
| $200
| $440 (55% of $800) or $520 (65% of $800)
|
Important note: Garnishment limits don’t apply to certain debts, such as federal or state taxes. An employee can also exceed the limit under a voluntary wage assignment.
What are an employer’s responsibilities?
As an HR, payroll professional or business owner, there are several steps you need to take when you receive a wage garnishment notice:
- Notify the employee that you received the wage garnishment notice.
- Respond to the notice by filling out and returning the enclosed form, if applicable. (You must still respond to the garnishment order if the named employee no longer works for your organization.)
- Check your state’s wage garnishment laws. If they differ from Title III, follow whichever regulations favor the employee.
- Start garnishing the employee’s wages per the order.
If your employee has multiple garnishments, they typically get paid out on a first-come, first-served basis. However, child support and tax garnishments take precedence over other debt.
Many states allow employers to recoup a small amount (generally a few dollars) to cover administrative costs for child support garnishment orders. Companies may be able to get nominally compensated for processing other orders, too.
What can an employee do about wage garnishment?
If you’re an employee facing wage garnishment, you can:
- Challenge it in court: File the appropriate paperwork with the clerk of court. Be sure to respond to the garnishment order quickly, as your window to contest the order may be small.
- Try to work out an alternate payment arrangement with your creditor: The creditor may be willing to help you avoid garnishment through a payment plan or settlement.
- File for bankruptcy: Doing so will pause collection efforts and shed the debt (not applicable to child or spousal support). Other types of debt, such as student loans or tax debt, may not get discharged.
- Get professional help: The Consumer Financial Protection Bureau (CFPB) says it may be worth hiring an attorney who understands your rights and can possibly help you negotiate a favorable settlement with your creditor.
Until your employer is notified otherwise, it must withhold and remit earnings that are subject to a garnishment per the garnishment order.
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Frequently asked questions (FAQs)
Federal law prohibits an employee from being fired for a single wage garnishment. However, employees with multiple garnishments aren’t protected under the legislation.
Wage garnishment is a mandatory, often court-ordered, seizure of a percentage of an employee’s earnings by a creditor. On the other hand, voluntary wage assignment is an optional transfer of earnings to a creditor that an employee elects to initiate.
Robinson says, “Income that can be garnished typically includes wages, salaries, bonuses, commissions and other earned income. Depending on the circumstances, things like rental income or retirement benefits may also be garnished.”
An employer should only stop garnishing wages under a few circumstances. Most commonly, the company will eventually receive an official notice revoking the garnishment order. The debt in the order may also get fully repaid or the garnishment period may end per the date listed in the order.
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