Wage Garnishment: What They Can Take and How to Stop It

Garnishment is the point where debt stops being a phone call and starts being a line item on your pay stub. It is also the stage where the most people give up, usually because they did not know how much of it was preventable.

How a creditor gets to your paycheck

With a handful of exceptions, a private creditor cannot touch your wages without first suing you and winning a judgment. The sequence is:

1. You are served with a summons and complaint.
2. You answer, or you do not. Most people do not, and the court enters a default judgment.
3. The creditor takes the judgment to your employer with a garnishment order.
4. Your employer withholds from each check until the judgment, plus interest and costs, is satisfied.

Step two is where the case is usually decided. Responding to a summons, even with a simple answer that denies the allegations and raises defenses such as the statute of limitations, forces the creditor to prove the debt. Debt buyers often cannot.

What they can take

Federal law caps ordinary garnishment. Under Title III of the Consumer Credit Protection Act, the weekly amount taken from disposable earnings cannot exceed the lesser of 25 percent of disposable earnings, or the amount by which disposable earnings exceed 30 times the federal minimum hourly wage. Disposable earnings means what is left after legally required deductions such as taxes and Social Security, not after rent and groceries.

Some states protect substantially more, and a few effectively prohibit wage garnishment for consumer debt. When state and federal law differ, the one more favourable to you applies. The Department of Labor's Fact Sheet 30 works through the calculation with examples.

Different, higher limits apply to child support and alimony, up to 50 or 60 percent of disposable earnings with an extra 5 percent for arrears. Federal student loans and federal tax debt follow their own rules and do not require a court judgment at all.

Your job is protected, once

Title III also forbids an employer from firing you because your wages are garnished for one debt. That protection does not extend to a second or subsequent garnishment, which is a real risk if multiple creditors have judgments.

Bank accounts and benefits

A judgment creditor can also levy a bank account, which is more disruptive than wage garnishment because it takes a lump sum without warning. Federal rules protect directly deposited federal benefits: when a bank receives a garnishment order, it must review the prior two months of deposits and automatically protect an amount equal to the Social Security, SSI, VA, or other covered federal benefits deposited during that window.

Money is easier to protect while it is still identifiable as benefits, so keeping benefit deposits in an account separate from other funds is worth doing before there is a problem. The CFPB's answer on whether a collector can take Social Security or VA benefits covers what is and is not protected.

Options once garnishment has started

• File a claim of exemption. Every state has a procedure to reduce or stop garnishment based on income and dependents, usually with a short filing deadline. This is the first thing to check.
• Move to vacate a default judgment. If you were never properly served, which happens more than it should, a judgment can sometimes be reopened.
• Negotiate a payment agreement. Creditors will often accept voluntary payments in place of garnishment, since it costs them less. Get it in writing and confirm the garnishment is released.
• Settle the judgment. Judgments can be settled for less, particularly if collecting is difficult. See our guide to negotiating with creditors directly.
• Bankruptcy. The automatic stay stops most garnishments immediately on filing, and money taken shortly before filing can sometimes be recovered. The federal courts explain the mechanism in Bankruptcy Basics.

Special cases worth knowing

Federal student loans can be garnished administratively, without a lawsuit, at up to 15 percent of disposable pay. Getting the loan out of default through rehabilitation or consolidation stops it, and both are free to arrange through studentaid.gov.

Unpaid federal taxes are levied under a separate schedule that leaves you a standard-deduction-based exempt amount rather than a percentage. Installment agreements and offers in compromise generally stop the levy.

Independent contractors are not employees, so wage garnishment rules do not apply the same way, but payments owed to you can be reached by other collection tools.

The takeaway

Garnishment is the end of a process with several exits, and almost all of them are earlier than people take them. Answer the lawsuit. Check your exemptions. Ask for the payment agreement. By the time money is leaving your check, your options are narrower and more expensive than they were three months earlier.