Understanding Your Wage Garnishment

Are your wages being garnished? Wage garnishment can occur because of a court order or judgment. It can also happen because of unpaid taxes, defaulted student loans, child support, and other issues. The key idea is that a portion of your paycheck is held back to make these payments.

Learn the facts about wage garnishments and how you can protect yourself:

1. Understand the federal laws. In most cases, a bank or creditor must obtain a court judgment before wage garnishment can start. You should be notified about the court order process.  

• The law restricts how much can be taken from your paycheck to pay creditors.
• The maximum limit is generally 25 percent of your paycheck, taken after standard deductions such as regular taxes or health insurance. However, it can vary based on other factors. For example, you may lose 50 percent of your paycheck if you owe child support.
• Each state has its own rules and may have even lower maximum limits.

2. Wage garnishments and taxes. The IRS doesn’t need an official court order for wage garnishment if you owe taxes. This is important to remember because the process is different for unpaid taxes.

• The garnished amount will vary, but the IRS uses the number of dependents to figure it out. In addition, your standard deduction plays a role in the final figure.
• State and local districts can also garnish wages for unpaid taxes.

3. Be aware of job security and protection. Your employer can’t fire you because of the wage garnishment and extra hassle of taking money out of your paycheck. This can’t be used against you at work.

• Laws are in place to protect you from losing your job during a wage garnishment.

4. Consider fighting a court order. If you disagree with a wage garnishment, you must use the court system to fight it.

• You’ll have to present your case in court during a hearing and show that the garnishment is placing an unreasonable burden on you. You may also ask if you qualify for an exemption.

5. Student loans. If you have federal student loans, then a court order may not be necessary for a garnishment to start.

• If you default on your federal student loans, the garnishment can start without a court judgment. However, you can start a repayment plan or ask for an exemption.

6. The role of bankruptcy. Bankruptcy may stop a wage garnishment, but it carries other consequences.

• After you file for bankruptcy, you get an automatic stay that puts a hold on garnishments.
• Creditors must appear in court and ask that the stay be removed to start the wage garnishments again.
• The automatic stay doesn’t apply to all types of garnishments. If you owe child support or alimony, the stay doesn’t apply, and you’ll still have to pay a portion.
• You should notify your employer, sheriff’s department, and others about the bankruptcy. This will prevent miscommunication and other issues from appearing.
• You may be able to get some of your previously garnished wages back during a bankruptcy. This usually applies 90 days before the bankruptcy is filed. You may have to file additional paperwork to get the wages back.

A wage garnishment can have a severe impact on your income and lifestyle. Even if you owe the money being garnished, you still have some legal protections. Learn your rights so you can use them to your advantage.