Here's What to Do If Your Wages Are Garnished


The concept of wage garnishment is frightening. And while having your wages taken to pay off a creditor is considered an extreme "last resort" to collect on a debt, it is more common than you may think.

A 2013 report by ADP Research Institute found that approximately 7 percent of the 13 million employees assessed in their survey had experienced wage garnishment that year, the majority of which were workers aged 35 to 44. The most common reasons for this drastic form of collection were unpaid taxes, child support, consumer debts, and student loans.

If you have fallen behind repaying what you owe, and creditors are threatening to or have already garnished your wages, here are the things you should do. (See also: Be Careful Who You Owe: Here's Who Can Garnish Your Wages)

Understand what wage garnishment means

First, it is important to understand what wage garnishment is and how it works. In a wage garnishment, creditors have sued and won a judgment against you. A court issues an order requiring your employer to withhold a portion of your paycheck. This is done until your debt is paid in full. Different garnishment rules apply to different types of debt and each state sets its own legal limits on how much of your paycheck can be garnished.

Nonwage garnishment, which is also known as a bank levy, is a legal action that allows creditors to tap directly into your bank account. Typically, the funds in your account are frozen, and the bank is ordered to remove the necessary funds to satisfy the debt.

Once a judgment is entered against you, the person or entity that won the lawsuit gains access to a portion of your wages by providing a copy of the court order to local law enforcement. Law enforcement sends the court order to your employer. Your employer must notify you of the garnishment and begin withholding part of your wages. Your employer is also responsible for ensuring the garnished funds are sent to your creditor. (See also: What Really Happens When You Don't Pay Your Student Loans)

Know your rights

If you have defaulted on a loan, stopped paying your credit card bill, or have incurred massive amounts of medical expenses, creditors can't just take money from your paycheck. There is a process that must be followed.

  • You have to be sued.

  • A judgment must be entered against you.

  • A court ordered wage garnishment must be issued.

  • You have to be notified of the court order (by your employer, and most times the creditor).

  • You have the right to appeal the decision.

It is also important to note that federal law places limits on how much creditors can take from your paycheck. The amount that can be garnished is capped at 25 percent of your net income or the amount by which your weekly wages exceed 30 times the minimum wage, whichever is the lowest. Some states set lower garnishment limits so it is important to know the laws that apply to your particular situation.

Know the exceptions to the rules

While the above rules govern most cases of wage garnishment, there are a few exceptions. For example, when it comes to child support, half your net earnings can be taken without a court order. If you don't have a spouse or other children whom you support, a whopping 60 percent can be taken. And an additional 5 percent can be tacked on if you are more than 12 weeks in arrears.

If you owe money to the IRS, tread carefully. It can take a big bite out of your wages, without a court order. The amount it can take depends on the number of dependents you have and your standard deductible amount. However, before snatching your money, the IRS must notify you of their intent first. They are required to send a wage levy notice to your employer, who is required to supply you with a copy. (See also: 10 Reasons You Should Really Fear an IRS Audit)

State and local tax agencies can also garnish your wages without a court order. Most states have laws limiting how much they can take. The information concerning the rules and limits is available at your state's department of labor.

The bottom line is unless you owe child support, back taxes, or student loans, your creditors cannot garnish your wages without going through the appropriate steps and obtaining a court order.

If possible, avoid the process altogether

When facing a situation where you know you can't pay a debt — of any kind, but especially child support — the best course of action is to be proactive. Contact your creditors (or petition family court) and try to reach a restructured payment arrangement.

If you don't show up to court or you lose your case, the creditor automatically wins a judgment against you to garnish your wages or bank account.

Try to settle the debt

If you know a creditor is considering taking legal action, see if you can settle the debt. This is especially effective with credit card companies. Often times, most creditors (including the IRS) are willing to accept a settlement — which is a partial payment of the total amount due — in lieu of going to court. This allows you to avoid a lawsuit, wage garnishment, and even more damage to your credit. (See also: 4 Ways to Negotiate Credit Card Debt)

Understand the court order

If a judgment is issued against you, carefully review the court documents. Make sure all the information is accurate. Creditors can make mistakes. Check to ensure the outstanding amount is correct and it's not something you've already paid. Also, examine the debt carefully to be sure that it is indeed your debt. We live in an era of security breaches and identity theft. It is important to ensure that you are not being sued for someone else's fraud.

It is also important to know that in some circumstances, some states provide protection for a portion of your wages — these are called exemptions. When you receive the garnishment notice, research the laws in your state and find out if and how much wage protection you are entitled. File a petition in state court requesting the exemption.

Challenge the judgment

When a judgment is issued against you, you have the right to appeal it. If you believe the judgment is flawed, is unreasonable, will cause undue financial harm, or is being improperly executed, you can contest the court's ruling. You will be notified of the ruling and of the process to appeal. Pay attention to rules governing the appeal and file immediately — in some cases, you may have as little as five business days to voice your objection. If you fail to show up in court, the creditor automatically wins a judgment against you.

Accept the judgment

Accepting the judgment isn't necessarily a bad thing. You are forced to face and remedy a situation that has probably caused you copious amounts of stress. You can simply allow your wages to be garnished and make your payments that way.

Don't file for bankruptcy or quit your job

Bankruptcy immediately stops garnishment proceedings, however it is ill-advisable to file just for this reason. Bankruptcy carries with it a litany of consequences and implications and shouldn't be considered lightly. Filing bankruptcy to avoid wage garnishment would be akin to extinguishing a match with a fire-hose. Always consult a professional before you take any drastic measure that can have detrimental and long-term consequences.

Quitting your job is equally ill-advisable. You're doing nothing but prolonging and complicating the process. If you fear retaliation from your employer, understand that under federal law, you cannot be fired if your wages are garnished to pay off one debt. These protections lessen, however, if more than one creditor has garnished your wages.

It's also important to note that becoming unemployed doesn't negate the judgment. The judgment will be enacted on the next job you get and is still part of your credit history. Continuously trying to skirt payment could result in the court taking more aggressive action which could include serving jail time.

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