When individuals do not pay their bills, the creditor who holds their debt can get a court order to have their wages or property “garnished.” The creditor, with assistance from the court, can compel the debtor’s employer to withhold a portion of the employee debtor’s paycheck to be paid directly to the creditor.
History of Garnishment Law
The Federal Garnishment Law (Title III of the Consumer Credit Protection Act), was passed in an effort to protect consumers from unfair or harsh collection practices. This law limits the amount an employer can be required to withhold to pay creditor debts, child support and alimony payments. The Federal law also makes it illegal for an employer to fire the employee who is subject to having just one wage garnishment. In addition to federal laws, there are also individual state laws in place to protect individuals from harsh wage garnishment practices by creditors.
How Garnishments Work
Before obtaining a garnishment, a creditor must have a judgment against a debtor. Frequently debtors will be sent collection notices from a collection agency or law firm until eventually a case is filed against the debtor. If the debtor loses the case (or does not show and a valid legal debt is presented to the satisfaction of the court), a judgment is issued in favor of the creditor against the debtor.
If the debtor does not pay the judgment amount within a reasonable time after receiving notices of a judgment awarded, a creditor will usually go to court and ask for a wage garnishment. But before going to court, the creditor must give a notice of garnishment to the debtor before they can collect. The notice must clearly state that they have won the property garnishment and explain what the exemptions to garnishment are. The notice will clearly state what possessions can be take from the debtor and there are certain types of property that cannot be taken and this should also appear in the notice. The debtor should also be informed on what are available options to contest the garnishment. If these steps are followed and the debtor comes to court asking for a garnishment, a court order may be granted and will state how much the debtor owes, what the garnishment amount will be for each period, what the interest rate is and how long the garnishment will last.
If the creditor has won a garnishment judgment against debtor, the creditor can ask the court to order the debtor to appear so you can be questioned on what assets the debtor owns, what bank accounts he/she may have and also inquire about other personal property the debtor may have. Not appearing in court to answer questions after being served can result in dire consequences for a debtor.
After the creditor has the garnishment order, the creditor needs to take the court order to the local law sheriff to have him enforce the order. The sheriff will serve the employer who will then be subject to garnishing the wages of the employee or seizing property that may be taken per the court order.
Types of Garnishments
There are several types of garnishments. The most common types are:
- Child Support: When there is failure to pay child support, an order for garnishment may be issued. Wages will then be withheld from the garnished parent’s paycheck each month and paid to the court. The court then pays the custodial parent.
- Alimony: Any time there is a divorce decree that awards alimony, a court can order a wage garnishment from the employee. The garnishment funds will be paid to the court who will, in turn, pay the recipient spouse.
- Student Loan: Students who fail to pay back their loans can be subject to wage garnishment from the federal government or other lending institutions. These funds will be issued directly to the creditor each pay date.
- Taxes: Garnishments to pay federal, state and local taxes may be ordered by the court.
- Voluntary Wage Assignment: Credit card companies can get a court order to attach a wage garnishment for their unpaid debt.
- Vehicle: Vehicles can be repossessed when there is a failure to pay the payments for automobile loans. However, repossession is not allowed if the equity in the vehicle is under $2,000 in most states. Lien laws may also take precedent over garnishment laws in some states. Check with you local garnishment attorney for more specific information about garnishments and lien rules that are specific to the state in which you live.
Limitations on Garnishments
Federal law has set maximum percentage amounts that can be deducted for garnishments. State laws may impose lower limits on garnishments than Federal Laws. Creditors are limited and can only take a portion of your disposable income earnings. Certain deductions must be removed first before calculating disposable income and garnishment amount decided. These deductions are not subject to garnishments. These are such things as Social Security benefits, Retirement benefits and Public assistance benefits, etc.
Child Support and Alimony
When the garnishment is for child support or alimony, even veteran’s benefits, worker’s compensation, unemployment, Social Security, military retirement benefits, survivor benefits and disability benefits are allowed. The garnishment maximum limit amount is also higher for child support garnishments than for typical creditors.
Funds not subject to Garnishment
The following funds are not subject to be garnished for debts other than those garnishments that are for child support and alimony payments:
- Veteran’s benefits
- Social Security benefits
- Survivor benefits
- Supplemental Security Income benefits
- Railroad Retirement Benefits
- Military Retirement
There are also various types of state benefits that may not be subject to garnishments. These vary from state to state. Contact a local wage garnishment attorney or the Consumer Protection Bureau for more information pertaining to your particular state.
Any monthly government benefit funds that are deposited into a regular bank account for immediate use for your daily expenses are not subject to garnishment. However, if you use them to make long term investments, they are subject to being garnished.
Filing for Bankruptcy Will Stop Garnishments
If you file for bankruptcy, garnishments for most debts will be immediately stopped by the automatic stay process. However, filing for bankruptcy will not stop garnishments for child support and alimony.
Employers Required to Withhold Pay for Garnishments
Under Federal law, employers are required to cooperate with one garnishment judgment and withhold the ordered amount from the employee’s paycheck each pay period. Employers can not fire their employee because of a garnishment order. There is a $1,000 fine and possible imprisonment up to one year if they violate this law. However, the employer can legally fire their employee if they have more than one garnishment.