Can Creditors Garnish Your Wages? The Process Explained

Wage garnishment is a legal procedure allowing a creditor or government agency to collect an unpaid debt by directly withholding a portion of a debtor’s earnings. Most garnishments are initiated through a court order, though some government entities can proceed administratively without a prior judgment. Its purpose is to ensure the repayment of various types of debts.

Circumstances Leading to Wage Garnishment

For most private or consumer debts, such as credit card balances, medical bills, or personal loans, a creditor must obtain a court judgment before pursuing wage garnishment. This judgment is a formal legal decision confirming the debtor owes a specific amount of money. Once secured, the creditor gains legal authority to initiate collection actions, including requesting a wage garnishment order.

Specific exceptions exist where a prior court judgment is not always necessary. Government-related debts often have administrative processes allowing direct wage garnishment. This includes obligations like child support and alimony, often ordered by family courts. Federal student loan defaults and unpaid federal income taxes (IRS administrative levy) also allow for wage seizure without a court order after proper notice. State tax authorities may also employ similar administrative procedures for collecting delinquent state taxes.

The Creditor’s Process for Wage Garnishment

When pursuing a judgment debt, a creditor typically initiates the garnishment process by filing a separate motion or application with the court that issued the original judgment. This request seeks a specific wage garnishment order. Upon approval by the court, a “writ of garnishment” or similar order is issued, which legally compels the employer to withhold funds.

The garnishment order is then formally served on the debtor’s employer, who is legally referred to as the “garnishee.” Service of process ensures the employer is properly notified of their obligation to comply with the court’s directive. The employer then assumes a legal responsibility to calculate the correct amount to withhold from the employee’s earnings and remit it to the creditor or the court as specified in the order. Employers must begin garnishing wages as soon as they receive a valid order and continue until the debt is satisfied or the order is released.

For administrative garnishments, such as those for federal student loans or IRS tax levies, the process differs slightly as it bypasses the need for a court order. Federal agencies, like the Department of Education or the IRS, issue an administrative wage garnishment order directly to the employer. Before such a garnishment begins, the debtor typically receives advanced notice, often 30 days, informing them of the impending action and their right to request a hearing to dispute the debt or arrange a repayment plan. The employer then directly withholds the specified portion of wages and sends it to the respective government agency.

Types of Income Subject to Garnishment

Wage garnishment primarily targets an individual’s earnings from employment. This includes regular wages and salaries, which are the most common form of garnished income. Earnings based on performance, such as commissions, are also subject to garnishment.

Additional forms of compensation, like bonuses, can also be garnished. Tips received by employees are considered earnings for garnishment purposes, especially if they are part of the employer’s reported tip credit or cash wages. Other types of compensation subject to garnishment include severance pay, certain periodic payments from a pension or retirement program, back pay, and workers’ compensation payments for wage replacement. Voluntary deductions, such as 401(k) contributions or health insurance premiums, are not typically excluded from disposable earnings for garnishment calculations.

Protections Against Wage Garnishment

Federal law provides protections against excessive wage garnishment through Title III of the Consumer Credit Protection Act (CCPA). This law limits the amount of an individual’s “disposable earnings” that can be garnished in any workweek or pay period. Disposable earnings are defined as the amount remaining after legally required deductions, such as federal, state, and local taxes, Social Security, and Medicare, have been withheld.

For ordinary debts, the CCPA limits garnishment to the lesser of two amounts: 25% of an employee’s disposable earnings, or the amount by which disposable earnings exceed 30 times the federal minimum wage. This means a portion of earnings equivalent to 30 times the federal minimum wage is protected from garnishment, ensuring a minimum amount of income remains for the debtor.

Higher limits apply for specific types of debts. For child support and alimony, up to 50% of disposable earnings can be garnished if the debtor is supporting another spouse or child, and up to 60% if they are not. An additional 5% may be garnished if support payments are more than 12 weeks in arrears, potentially reaching 55% or 65% respectively. Federal agencies, including the Department of Education for student loans, can generally garnish up to 15% of disposable earnings for debts owed to the U.S. government.

Many states have their own wage garnishment laws, which can offer greater protection to debtors than federal law. If state laws differ from federal laws, the law that results in a lower amount of earnings being garnished must be observed. Some states may prohibit garnishment for certain consumer debts entirely or set lower percentage limits.

Certain types of income are often fully or partially exempt from garnishment under federal and state laws. Common examples of exempt income include:
Social Security benefits
Supplemental Security Income (SSI)
Veterans’ benefits
Federal railroad retirement benefits
Public assistance or welfare benefits
Unemployment benefits
Workers’ compensation payments

While some pension payments can be garnished, many private pensions are protected under the Employee Retirement Income Security Act (ERISA).