Understanding the perils of garnishment
It can happen to you. Fail to pay taxes, skip out
on child support or overlook some bills. One day down the road,
you open your paycheck to find that it's shrunk. Uncle Sam, your
state government or another creditor has collected some of your
These folks take their cut thanks to a process known
as wage garnishment. This legal procedure allows for a portion of
an individual's earnings to be withheld by an employer to satisfy
And the money comes out before you even see your pay.
Although having your paycheck garnished may be upsetting,
it certainly shouldn't be a surprise. Garnishment is at the end
of the road, after all other options have been exhausted. Most garnishments
require a court order, and employers are usually required to notify
workers about the garnishment before it goes into effect.
"This doesn't happen in a vacuum," says
Eva Rosenberg, a Los Angeles tax accountant.
Tax debts are common
Rosenberg, who as the Tax
Mama offers online filing advice, also counsels clients personally.
In her practice, she's seen repentant tax shirkers come to her with
10 to 20 unopened envelopes -- all letters from the Internal Revenue
Service demanding payment or an explanation on why taxes haven't
The taxpayer has ignored them, trying to wish them
away. Denying the problem, however, only brings the wayward filer
closer to having the bill paid directly from a paycheck.
"Ignore the IRS and your wages will be garnished,"
Rosenberg says. "They know where you live, where you work and
where your bank account is."
The IRS isn't alone in collecting past-due debts this
way. State governments, private creditors or an ex-spouse demanding
alimony or child support can all request garnishment of your pay.
In addition to garnishing for taxes, federal and state governments
can seek to attach wages if a person defaults on government-backed
student or business loans.
While the different branches of government don't need
a court order to get a piece of your paycheck, other third parties
must petition the court for redress.
And government creditors can garnish more than your
paycheck. If you receive veteran's benefits, Social Security or
other government money, federal and state agencies can collect from
those funds as well.
They can't take it all
Losing any income is never easy, but there are garnishment limits.
Title III of the Consumer Credit Protection Act caps
the amount of wages that can be taken from an owing worker's paycheck.
This leaves the employee some income and prevents creditors from
taking excessive amounts to speed up debt repayment.
The garnishment level is based on an employee's disposable
earnings. This is the amount left over after legally required deductions
have been made for federal, state and local taxes, Social Security,
unemployment insurance and state employee retirement systems.
What doesn't go into the equation are other voluntary
deductions, such as for union dues, health and life insurance, contributions
to charitable causes, purchases of savings bonds, and payments to
employers for payroll advances or purchases of merchandise. These
amounts may not be subtracted from gross earnings when calculating
When the disposable income amounts is determined,
the maximum amount that can be garnished in any pay period may not
exceed the lesser of two figures:
- 25 percent of the employee's disposable earnings
- the amount by which an employee's disposable earnings
for the workweek are greater than 30 times the federal minimum
Under the first scenario, a worker who clears $500
a week would face a garnishment limit of $125. Under the second,
30 times the current minimum wage of $5.15 an hour comes to $154.50,
meaning wages up to $345.50 can be garnished. However, thanks to
the key phrase "lesser of," this owing worker will only
face the loss of $125 from each paycheck.
Exceptions to the rule
The rules change, however, when it comes to child support and alimony.
law, administered by the Wage and Hour Division
of the Department of Labor's Employment Standards Administration,
allows up to 50 percent of a worker's disposable earnings to be
garnished, if the worker is supporting another spouse or child.
If there is no second family to be taken care of, up to 60 percent
can be taken. An additional 5 percent may be garnished for support
payments more than 12 weeks in arrears.
Debtors should keep in mind that the law's limits
do not cover "voluntary wage assignments." These are cases
where you work out a pay arrangement with the IRS or other creditor.
Garnishment restrictions also do not apply to bankruptcy
court orders and debts due for federal or state taxes. If you fall
afoul of Uncle Sam, he can take out as much as he wants from your
And if a state wage garnishment law differs from the
federal law, the law that produces the smaller garnishment amount
must be followed.
Reducing the take
If your wages are being garnished, you may be able to lower the
amount taken out of your paycheck, says Hillary Arrow Booth, partner
with Gardner & Booth, a Los Angeles law firm.
You need to make the case that the figure listed in
the garnishment order is not enough to support yourself and your
dependents. A salesperson, for example, may need a clothing allowance
to continue working.
While it may be possible to whittle away at the garnishment,
Booth says to remember that if your creditor is seeking repayment
for a life necessity, such as chemotherapy, that debt takes precedence
over current or future life necessities.
Garnishment law limitations also extend beyond dollars.
Title III protects an employee from being fired in some instances
because of the debt collection process.
"You cannot be fired in retaliation for a garnishment
or because it's a pain for the employer," says Booth.
The protection, however, is not absolute. While an
employee cannot be dismissed for one garnishment, the law does not
prohibit discharge if the employee's earnings have been garnished
for second or subsequent debts.
Avoiding the paycheck bite
Of course, the best thing to do is to avoid garnishment altogether.
When it comes to taxes owed, you're much better off
negotiating payment terms than having Uncle Sam or a state revenue
office picking at your paycheck. Just communicating with tax officials
sometimes can be enough to forestall garnishment.
According to Rosenberg, the IRS will give you 20 days'
notice before garnishing your wages. Use this time, she recommends,
to "call up the IRS, apologize, beg for mercy and ask them
for a little more time to sort out the program."
The same holds true for creditors, who generally find
it's a hassle to go to court to get an order to garnish wages. Creditors,
too, must give some warning before they start collecting. It varies
by state, but any lead time allows you an opportunity to call and
explain your circumstances, or if you truly believe you do not owe
the money, prove your innocence. Provided you act in good faith,
most creditors will bend over backward to work out an installment
"From a creditor's perspective, the garnishment
is a pain in the neck," Booth says. "They get little dribs
and drabs of their money back, and it's a lot of work to put in
place. Very often creditors seek garnishment simply as a way to
get the attention of the debtor. They'd be better off and so will
you if you negotiate a voluntary pay plan."
When you can work out a payment agreement, get a copy.
Make sure that you understand the terms and that the arrangement
is something you can live with and abide by. For example, if you
agree to an automatic payment from your bank account, choose a time
in the month when you'll have sufficient funds.
And remember, if you mess up this second chance and
quit paying on the installment plan, you'll quickly find yourself
again facing garnishment proceedings.
"Don't make a payment," warns Rosenberg,
"and they're going to attach your bank account."