How Does Wage Garnishment Work?

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 What is Wage Garnishment?

Commonly, wage garnishment or wage attachment is an order issued by a court or government agency. It causes an employer to automatically deduct specified monies from an employee’s wages before the employee receives payment.

The two most common types of wage garnishments are those issued by the IRS or for child support obligations. Wages can also be garnished to pay money owed to a creditor.

The intent of this process is usually to ensure payment of delinquent taxes, child support payments, alimony obligations, or debts.

How Does Wage Garnishment Work?

Let’s say for example you have an ongoing debt obligation with a credit card company. They have taken you to court, received a judgment against you, and, if you don’t pay them voluntarily, they may attempt to put a lien on your home.

If you don’t own a home, then a creditor may take legal steps to get their money from your wages because it’s one of the few things creditors can do under federal law.

The amount withheld depends on how much you make. For instance, if you make $1,000 per week and the creditor wants 25%, this would mean they could take $250 from each paycheck until the balance is paid.

The amount of money that can be taken from your paycheck and used for debt repayment is based on what’s called “disposable earnings.” This term refers to all the wages leftover after legally required deductions, including federal taxes like Social Security or Medicare payroll charges.

When Can a Creditor Garnish My Wages?

A creditor may garnish your wages, bank account, or other property in order to collect unpaid child support and debts owed. In addition to just owing money, generally, you need to be behind at least 90 days before a creditor can garnish your wages or bank account.

Unpaid Child Support
An unpaid child support situation usually happens when a parent fails to make payments on time or makes no effort to pay at all. With unpaid child support, people are able to request wage garnishment in an attempt to collect debts through their wages. When unpaid child support comes up in court, judges have discretion over how long it will take the person who owes unpaid child support to repay this money with interest and late fees added

If you owe past-due child support, your caseworker will notify you of the amount that is owed and provide information on how to pay it back. If you do not pay the amount in full by the established date, the agency may request permission from the court for wage withholding.

The agency will then send documentation requesting this action to your employer within 30 days of receiving written notification of the amount owed.

Typically, if your child support arrears are more than 12 weeks old, an agency may begin withholding an income assignment for payment of past-due child support without having to get court approval.

Once that is established, wage withholding can begin 30 days after you receive written notification from the agency.

If it is determined that you cannot afford to pay your child support, or if you refuse to pay, then your caseworker can seek a court order for garnishment of up to 65% of your wages until the debt is paid off in full.

In some states, there is no limit on how long a person must be unemployed before their child support arrears expire and current support resumes.

Student Loans in Default
The Department of Education and Guaranty Agencies can garnish up to 15% of your wages if you defaulted on a student loan. However, the debt cannot exceed more than 30 times the current federal minimum wage or greater than 50% of disposable earnings, whichever is less.

There are several options available to help resolve a defaulted federal student loan that includes deferment or forbearance, which stop or reduce monthly payments for a specific amount of time.

You can also consolidate student loans which allow you to combine your existing student loans into one new loan with repayment terms that are more manageable. Income-driven repayment plans that limit your monthly payment to a percentage of your discretionary income are also available.

Unpaid Taxes
The government may begin the garnishment process after you fail to pay back income taxes for at least 90 days. To collect unpaid federal taxes, the most common way is wage withholding which allows them to withhold amounts from each of your paychecks until all back taxes are paid.

Federal tax levies will continue until the debt is satisfied or expires under state law. The IRS also has other enforcement tools it can use if needed including issuing a levy against certain types of property such as bank accounts or wages or even filing a tax lien against your property.

The IRS will typically not seize assets if you owe less than $10,000 ($5,000 for taxes owed to a state).

You may be able to negotiate with the IRS through an Offer in Compromise (OIC) that allows you to settle your debt for less than the full amount owed.

However, this option is only available if you are current with all of your monthly payments and have not failed to file your previous year’s tax return.

If approved by the IRS, an OIC suspends collection activity on the outstanding balance until it’s paid in full or expires after 240 months from the time it was accepted.

Can an Employer Fire Me Because of a Wage Garnishment?

Federal law prohibits employers from discharging employees whose wages are subject to wage garnishments; however, some states allow for an employee to be discharged if there are more than two (2) garnishments in place at one time. State laws also govern whether the amount of wage garnishment is limited in any way.

The law that protects people in this situation is Title III of the Consumer Credit Protection Act, which prevents employers from firing employees for wage garnishments. In some states, workers fired due to wage garnishments are entitled to unemployment benefits.

Are There Consequences for Employers Who Don’t Comply with a Garnishment Order?

The consequences for non-compliance with wage garnishment orders can be severe. Employers who do not deduct garnishments from their employees can be subject to court-ordered fines and in serious cases even criminal charges and jail time.

In addition to the legal and financial consequences for employers, failing to comply with a garnishment order may result in negative publicity or damage an employer’s reputation.

Should I Contact an Attorney for Help With a Garnishment Issue?

You’re not alone if you’ve been hit with wage garnishment due to unpaid debt. With the slow economy, more and more people are experiencing this issue. If you’re facing a wage garnishment order, or if one already affects your salary, it’s worth consulting with an attorney to discuss your rights.

If you are considering filing for bankruptcy, it is important that you discuss this option with a financial attorney.

It can be difficult for someone without legal experience to navigate all the paperwork, so hiring an experienced lawyer can really benefit you

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