By Have you been able to pay off your debts?
Have you yet to make court-ordered payments?
Were you just a part of a debt collection lawsuit?
Did the court pass a judgment that awarded repayment of your depth to the creditor/collector?
Do federal laws require your employer to deduct a part of your salary to pay off outstanding debts?
Don’t worry. You are one of many people who have to make a debt repayment with a part of their salary.
Some of the most common methods of debt repayment can be:
- Repayment through cash
- Payment of depth through a property lien
- Court ordered liquidation
Wage garnishment is also called wage attachment.
When the court orders you to repay your debts, it does not automatically remove your consumer credit rights. Your credit collector cannot go beyond the law to repay the amount they lent you.
In this article, we will discuss all about wage garnishment, types of it, the process, exemptions, and relevant state and federal laws.
We provide our information from various credible sources, including the official website of Forbes, US state government websites, the federal wage garnishment laws of the US, and the Consumer Credit Protection Act Title III.
What Is Wage Garnishment Or Wage Attachment?
Wage garnishment is when a part of someone’s salary goes toward the payment of unpaid debts by the person. It is a legal procedure through which a court order legally requires the employer to do so.
- To stay legally compliant, the employer has to withhold a part of an employee’s wages. The portion will directly go to the creditor or the debt collector.
- Thus, what you need to understand is that wage garnishment primarily takes place to pay off outstanding debt.
- Wage garnishment can be difficult for the employee and for the company. It is a challenging decision for the company and its payroll department because of the complex legal nature.
- Various Federal rules govern wage garnishment practices in the United States. The state governments work according to these laws and also make additions of their own.
- To this list, various Court judgments are added daily, serving as precedents.
- Wage attachment is a legal process that serves both the creditors and the debtors. Debtors who find it difficult to range for money to repay loans can use this process well.
- A court order does not always have to accompany a wage garnishment. Sometimes, it may even arise without any direct judicial intervention.
In this section, we will discuss the circumstances where wage attachment can take place without a court order. If you’re wondering how to stop wage garnishment, debt settlement could be a good option. But there’s more to it which you must know.
Wage Garnishment Without Court Orders
Indeed, getting a wage garnishment was only done through court orders traditionally. However, exceptions do exist.
Exceptions work as a means for balance of power. Other entities also have the power to implement this process. This process delegates some of the judiciary’s responsibilities.
Wage Attachment For Paying Unpaid Taxes And IRS Levy
United States citizens often refer to the Internal Revenue Service as the all-powerful body when it comes to taxes.
- Therefore, the Internal Revenue Service can carry a wage attachment if you are sitting with an unpaid tax. This process is called an IRS levy.
- Through this process, the Internal Revenue Service will directly contact your employer. Next, they will demand a portion of your salary, which is to be sent to the IRS Offices by the end of every month.
- The Internal Revenue Service does not need a court to order a wage attachment to make this happen.
Unpaid Federal Student Loans
The United States Department of Education does not take unpaid student loans lightly.
- The federal law gives the Department of Education a right to wage attachment.
- It is also known as administrative wage attachment.
- All students who have defaulted on their federal student loans can be subject to this.
- This type of wage garnishment does not need a court order.
However, it will need to adhere to state and statutory requirements.
Enforcement Of Child Support
This is another common scenario where a wage attachment can take place. State laws in the US are robust when it comes to empowering causes for child support.
- This is why the court does not need to pass an order for wage garnishment for payment of unpaid child support.
- State Agencies have the statutory authority to see that all parties are holding up their part of child support obligations.
- For this process to successfully begin, the competent authorities have to notify the employer.
- From then on, the employer will withhold a part of the person’s salary and send it back to the child support agency.
- Our understanding of the concept of wage attachment is incomplete if we do not understand its types.
- In this section, we will talk about the different types of wage garnishment, their implications, and their differences from voluntary wage assignments.
Garnishment is a court-ordered mechanism to pay off unpaid debts. It is primarily of two types.
a. Wage Attachment
This is the most common type. Here, an employer has a legal obligation to hold a part of their employee’s salary to pay back the employee’s creditors. Wait attachment is powerful in the sense that it effectively allows creditors to recover their funds.
b. Non-Wage Attachments
This is called a bank levy and is a completely different approach. This is the process through which debt collectors can ask the bank to withhold funds of the debtor from the debtor’s account. The amount of funds the bank withholds goes directly to the creditor as a repayment. This method of non-wage garnishment is used when the other methods are not working.
c. Did You Know That There Is Something Called Voluntary Wage Assignment?
This is a concept that is completely different from wage attachment. Through this, an individual enters into a consensual dialogue with their creditor. According to it, the creditor can deduct a certain part of the debtor’s wage. That part goes into the repayment of their debt.
What Are The Most Frequent Grounds For Wage Attachment?
Wage garnishment allows creditors to take a portion of your wages to repay your unpaid debt.
This tool is handy for employers and creditors in the following situations.
For Paying Unpaid Alimony Or Spousal Support
Alimony is one of the primary reasons for wage attachment. Courts often order the more financially stable spouse to support the other after a divorce.
- If the financially stable spouse does not follow court orders, the recipe, and spouse can use wage attachment.
Here, the legal mechanism of attachment will help execute court orders properly.
Payment Of Unpaid Child Support
Child support wage garnishment is fairly common in the United States.
- Non-custodial parties go through the process of garnishment to secure child support.
This helps in restoring the financial stability of the child, whether or not the parent is willing to pay.
Student Loan Defaults
You must remember that Student loan default payments happen through wage attachments.
- This category is also one of the most common ones in the US. We classify it under administrative wage attachment.
- If the student fails to pay off a federal loan, there is no separate need for court orders. The official federal student loan holder is the U.S. Department of Education.
- This administrative body can start the process by contacting the student’s now-employer.
- Since this attachment is federal in nature, it is subject to maximum garnishment limits. The limits protect the debtor’s financial stability.
For The Repayment Of Outstanding Tax Debt
It is not too uncommon for United States citizens to lag in paying taxes.
- This is why the measure of wage attachment is a go-to for the federal or state governments to bring in unpaid taxes.
- The Internal Revenue Service (IRS) can also use this measure without a court order backing it up. As we have discussed before, that is known as a wage levy.
- Wage levies bring back delinquent tax payments to the Federal Reserve.
- If there is an outstanding state tax debt, relevant authorities can do something similar as well.
Bankruptcy And Wage Garnishment
We know that bankruptcy is available to the Citizens of the United States as a measure of debt relief.
- A bankruptcy claim can work wonders for the financially troubled.
- If the court allows, one may protect their assets and develop an extended repayment plan period through it.
- However, bankruptcy can manifest in the form of wage attachment, too.
- Under Chapter 13 of the US Bankruptcy Code, there are provisions for wage attachment.
- This method, however, is always a part of a court-approved repayment plan. Therefore, court intervention is necessary.
- Through wage attachment, a fair distribution of the debtor’s available assets is possible.
The Main One: Other Consumer Debts
Apart from all the options we have discussed above, wage attachment is most commonly a measure of consumer debt collection.
- Be it a credit card debt, medical bills, or personal loans, the creditor/collector can simply contact the debtor’s employer and arrange for it.
- However, there is a catch. The US judicial system ensures that consumer credit rights do not suffer.
- It mandates that for these types of debts, creditors will need to get a court order before contacting the debtor’s employer.
- Multiple state laws and regulations also set limits on the portion of wages eligible for attachment.
How Does Wage Attachment Work?
It is very important that a debtor understands how the whole process of attachment takes place.
- Even the employer has to know the process well.
- Otherwise, they will face consequences of non-compliance with the law.
How Can An Employer Notify The Employee?
When authoritative bodies like a court of law, state laws, or federal laws call for wage attachment, it is the duty of the employer to notify the employee.
- First, the authoritative body sends a notice to the employer.
- The employer will have to send out a notice through code or through a government agency to the employee.
- The notice will clearly state if it is a writ of a wage attachment, an income withholding Court order, or a tax levy by the Internal Revenue Service.
- The notice to the employer will contain all instructions on how to initiate the wage attachment process. It will even state the part of the salary for attachment.
- The employer will get the necessary information about who to contact when they need help.
- If you are an employee who is facing wage garnishment, we advise you to contact a lawyer immediately.
What Is The Maximum Amount Of Wage Garnishment?
The answer to the question depends on the circumstances of the employee. Depending on the debtor employee’s circumstance, the employer will either attach a fixed amount of their wages or a substantial percentage of their earnings.
What Are Earnings?
Under the Department of Labor Consumer Credit Protection Act, the earnings of an employee can include any compensation from their employer for their personal services.
Therefore, earnings can include the following:
- Hourly, monthly, and yearly Wages
- Salary
- Commission or extra Pay
- Bonuses
- Disability payments from the company
- Pension and other retirement benefits
- Any lump sum amount received for their personal services.
Final Word: What Does Federal Law Say About Wage Garnishment?
Title III of the Consumer Credit Protection Act sets a limit on the amount of wages that your employer can attach.
- This limit protects the financial interest of the debtor who is already facing financial trouble.
- The act bases the amount on the employee’s disposable income.
- Your disposable income is the amount that is left with you after all mandatory expenses are taken care of.
- Mandatory expenses include Federal and state taxes.
These are the key professions of the title regarding wage attachment limits:
- A creditor is not allowed to attach more than 25% of the employee’s disposable income.
- Disposable income is the amount left with the employee after paying federal, state, and local taxes, social security, and other retirement-based deductions.
- The title states that an employee should retain 30 times the minimum Federal wage after the attachment.
- Up to 60% of a person’s disposable income can qualify as an attachment for the purpose of child support and alimony. This person does come down to 50 if the person is already supporting another spouse or child.
If a person has filed for bankruptcy under Chapter 7 or Chapter 13 of the United States bankruptcy code, they enjoy greater protection from the state and Federal authorities.
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