How Does a Creditor Garnish Wages?

How Does a Creditor Garnish Wages

Wage garnishment is a legal procedure in which the court orders your employer to withhold a portion of your earnings to pay back your debt. It’s a typical process—around 7% of workers in the U.S. each year are left asking, “How does a creditor garnish wages?”. However, there are rules and limitations. Whether you’re facing garnishing for credit card debt, unpaid taxes, medical bills, overpaid Social Security and unemployment benefits, alimony, child support, or student loans, here’s a look at how the process works.

Wage Garnishment Process

When you default on a debt, it takes time for a creditor to get approval to garnish your wages. The exact steps depend on the type of debt, but the general approach is as follows:

  • A Wage Garnishment Notice Is Issued: Your employer will receive notice from the creditor. Most garnishments provide questions for the recipient to answer and respond to the creditor and/or court. Under state and federal law, employers are required to respond, or they can face potential liability or judgments.
  • The Employer Notifies the Employee: This isn’t always a requirement, but the employer can notify the employee about the order, the amount, and the time period. The notice may include a form, or the employer can draft a letter; oftentimes the company will include a cover letter with a copy of the order.
  • The Creditor Must Sue You: A legal process must be followed before a creditor can garnish your wages. For it to be successful, the creditor must go to court and be awarded a money judgment for the amount owed. The court will then direct the debtor’s employer to take deductions from their paycheck.

However, some creditors can begin the collection process without approval from a judge. A wage garnishment order doesn’t require court approval if you owe child support and alimony, back taxes to the IRS, or federal student loans.

Types of Wage Garnishment

Most people associate garnishment with having part of your earnings deducted and used to pay off your debt. However, a nonwage garnishment is also possible. Also called a bank levy, it’s when a creditor deducts funds directly from your bank account.

How Much Can Be Taken from My Paycheck?

Under federal law, a creditor with a court order cannot take more than 25% of your disposable earnings. Or, it can set an amount by which your weekly disposable income exceeds 30X the federal minimum wage. The court order will determine which formula to use by whichever amount is lower. Also, keep in mind that every state imposes limits on wage garnishment.

However, up to 50% of your earnings can be garnished if you owe child support or alimony. That’s if you are supporting another child or spouse. Otherwise, the creditor can take up to 60% from your paycheck, while an additional 5% may be taken if you’re more than 12 weeks late in making a payment. For federal student loans, 15% of your paycheck may be garnished, while the IRS generally can take up to 15% but the actual amount can vary.

You Have Some Control Over the Process

In most cases, you must be legally notified a creditor intends to garnish your wages. Once you receive notice, you can file a dispute if you believe you don’t owe the debt, it has already been paid, or the information is inaccurate. Legally, you can’t be fired for one wage garnishment. But if you have more than one, this protection doesn’t apply.

Some of your options include:

  • Contact the creditor directly, with knowledge of what you owe and can pay, and work out a payment plan with them.
  • Accept to pay the garnishment in installments or a lump sum if you can take out a personal loan or borrow the money from a family member.
  • Object to the garnishment in court if you believe it was made in error, was improperly executed, or may cause undue financial hardship (you may have only a few days to contest the ruling).

Contact a Wage Garnishment Lawyer Today

If you’re wondering, “How does a creditor garnish wages?” after receiving a garnishment notice, OakTree Law can help. Wage garnishment significantly reduces the amount of money you rely on to live, and can be devastating if you live paycheck-to-paycheck. But you have rights under the law, and our Los Angeles wage garnishment attorney can help by communicating with your creditors and employer, filing an exemption, or pursuing a Chapter 7 bankruptcy filing. To get started, request a free evaluation online or call 888-348-2609.