Key Takeaways

Wage garnishment is a court-mandated order that directs your employer to withhold a portion of your wages to settle a debt you owe. If you owe tax debt, the IRS can garnish your wages even without a court order. If you’re facing financial hardship or if the wage garnishment is in error, you may be able to dispute it or request relief.  

What Is Wage Garnishment?

Wage garnishment is a legal process where your employer withholds money from your paycheck to pay your lender. The party withholding your wages, typically your employer, is known as a garnishee. Federal law prohibits your employer from firing you to avoid processing a wage garnishment.

The Consumer Credit Protection Act places limits on how much can be withheld from your income. The state laws around wage garnishment vary greatly. Some states offer exemptions for certain situations or may have additional protections to shelter your bank account balance or income.

Types of Debts That Can Lead to Wage Garnishment

The most common types of debts which may lead to wage garnishment are:

  • Alimony
  • Child support
  • Student loan default
  • Outstanding tax debt
  • Bankruptcy
  • Unsecured debts like payday loans
  • Other consumer debt

Variations in state regulations surrounding wage garnishment can limit the maximum allowable amount, as well as the types of debts that can result in garnishment.

How Does Wage Garnishment Work?

If you have defaulted on a loan, your lender will need to get a court order proving that you owe money and have failed to make payments to start the garnishment process. If you owe a debt to the IRS, a court order is not necessary for wage garnishment. You and your employer will receive a notice from the state or the court, which may be called an Internal Revenue Service tax levy or a writ of garnishment.

The notice will include instructions on how and when the employer needs to start garnishing your wages. The amount that your employer needs to withhold will depend on the stipulations of the Consumer Credit Protection Act. For ordinary garnishments that are not for federal or state tax, bankruptcy, or support, these are the current limitations:

  • The garnishment amount cannot be over 25% of your weekly disposable income if your income is over $290/
  • It cannot be more than 30 times the federal minimum wage, which is currently $7.25/hour.
  • If your disposable earnings are less than $217.50, you will not receive any wage garnishment.

The limits listed above do not apply to voluntary wage allocations, student loan debt, bankruptcy, child support, or back taxes. If you owe child support payments, the court can order your employer to withhold 60% of your wages, depending on the number of dependents you have. In cases where state and federal government garnishment limits are different, the lower garnishment limit will apply.

“Navigating through the courts based on state, county, and districts can be overwhelming,” says Teresa Dodson, debt expert and founder of Greenbacks Consulting. “If you ever find yourself in a situation of wage garnishment, I recommend seeking legal assistance,” Dodson says.

How To Stop Wage Garnishment

The first thing you should do if you receive a wage garnishment judgment is to read the document carefully to ensure that the information is accurate. Make sure it isn’t related to a debt you’ve already paid and that the debt actually belongs to you. Next, decide if you’ll be able to afford all your other bills after deducting the garnishment amount. Once you have a better understanding of your financial situation, you can compare your options and decide your next steps.

Legal Options

Consult a local legal aid or a consumer law attorney to determine your best option. When you receive a wage garnishment judgment, there are three main options available to you:

  • Comply with the garnishment order.
  • Challenge the order in court if you feel that the judgment is in error.
  • Request for relief if you’re facing financial hardship.

If you want to contest the judgment, you’ll need to act quickly because you may only have as little as five days to do so. You can also contact the court for help if you’re facing financial hardship. If the garnishment is related to outstanding taxes or student loans, you may be able to claim an exemption. A wage garnishment attorney can also help you determine the relevant authority to contact for help. If the judgment is for child support, you may want to contact a family law attorney for legal advice instead.

Negotiating With Creditors

Even if the wage garnishment order is not in error, you can do a few things to resolve the situation. The first thing you should do is to take a deeper look at your budget, check how much you owe, and how much you can afford to pay. Come up with a plan to negotiate with your lenders to work out a solution, such as a repayment plan or a settlement. Contact your lenders to have an honest, open conversation. 

Ideally, you should negotiate with collection agencies and come up with a solution to repay the debt before they get a court order. But even after the court order is issued, you still have options.

Who Can Help

If you need help understanding your federal and state rights, it’s best to get help from an attorney experienced in consumer law. They can help you claim protections for the money in your bank account, benefits, or paychecks. Other than legal help, you can also seek help from credit counseling agencies and debt settlement companies.

Credit Counseling Agencies

If you’re unable to see the way forward with a wage garnishment, consult the services of a nonprofit credit counseling agency to discuss your options. Credit counseling sessions are usually free or low-cost, and they can provide you with financial advice on how you can manage your expenses with the garnishment or pay off your other debts.

If you have a lot of debt, credit counselors can also enroll you in a debt management program so you can stay on top of your debt and avoid another wage garnishment. They can also help you save money in the process by negotiating with your lenders to waive fees and penalties or lower interest rates.

Debt Settlement Companies

Another option is to consult a debt settlement company and see if they can negotiate with your lenders to settle your outstanding debt. With debt settlement, you’ll be able to settle your debt for a portion of the entire balance. If your offer is accepted, debt collectors will forgive the remaining debt.

Even after a court has ordered wage garnishment, you may still be able to negotiate with your lender to settle your debt. This is an effective way to ensure you pay off your debt sooner.

How To Prevent Wage Garnishment

One of the best ways to deal with wage garnishment is to ensure that it never happens in the first place. If you’re finding it difficult to keep up with child support, alimony, debt repayment, federal student loans, or other bills, there are several things you can do to keep your finances on track so you can avoid wage garnishment.

Creating a Budget and Saving

The first thing you should do is create a budget to get a better understanding of your income vs. your expenses. See how much you’re left with at the end of each month after accounting for all your expenses. This will also allow you to spot opportunities to save money by reducing certain expenses, such as subscriptions, dining out, and other discretionary expenses.

If you’re unable to save much after reducing expenses, it may be better to find additional sources of income, such as a side gig, overtime hours, or a business. Allocate any extra money you have towards building an emergency fund and making extra payments toward your debt.

Seeking Financial Assistance

If you’re still feeling stuck, seek financial assistance from other sources. If you’re in a tough spot and need temporary assistance, consider asking friends and family for help so you don’t miss out on important payments. Check to see if you qualify for any government programs. The U.S. Government offers a number of benefits and resources for those facing financial hardship. These government programs help with housing, bills, food, and more.

Whether you’re struggling to keep up with debt payments or have already missed several payments and are at risk of wage garnishment, TurboDebt can help you find a way forward. Our team will offer you a personalized debt relief option based on your individual needs. Get in touch with us for a free consultation today.