If you find yourself behind on debt payments, your budget is probably strained. Wage garnishment can make matters worse. But it’s an effective lever that creditors (or government agencies) can pull when seeking repayment for money that you owe.
Depending on your income, wage garnishment can result in several hundreds (even thousands) of dollars taken out of your paycheck. Here’s what you need to know about getting out of debt when you’re subject to wage garnishment.
What is wage garnishment?
Wage garnishment is when a portion of your paycheck is taken by a creditor or government agency for the purpose of collecting on your unpaid debt. Your employer will withhold the money from your earnings and send it directly to whichever entity you owe.
Wage garnishment doesn’t just happen; it typically comes after you’ve missed payments, your accounts have become delinquent, and your bills have gone to collections. Your creditors may then explore other options to receive their money—one of which is wage garnishment.
How wage garnishment works
Again, wage garnishment can only occur when a creditor or other authorized collector has the legal authority to take your money. This is usually when they’ve tried other methods of collection and failed.
To get that legal authority, they’ll generally have to file a lawsuit and receive judgment in their favor (for common consumer debts, at least; certain debts, such as taxes, don’t require a lawsuit). They can then request and order instructing your employer to allocate a specific amount of money each pay period for them. It generally remains until your balance is repaid or the order is changed.
Types of debts that can lead to wage garnishment
Not all debts qualify for wage garnishment—but many common ones can, namely:
- Credit cards
- Personal loans
- Medical bills
- Student loans
- Unpaid taxes
Even things like unpaid child support can be subject to wage garnishment if you fall behind enough.
How much of your paycheck can be garnished?
When it comes to most consumer debts, there are limits to wage garnishment. In other words, a collector isn’t allowed to take everything you make. There are caps to how much can be garnished, which is dictated by factors such as your type of debt, amount of disposable earnings, and state laws.
Disposable earnings means your take-home amount after federal, state, and local taxes—as well as your share of Medicare, Social Security, State Unemployment Insurance tax, and retirement.
Federal wage garnishment limits
Federal law typically stipulates exactly how much of your disposable earnings a creditor can garnish. The Consumer Credit Protection Act (CCPA) prevents wage garnishment from exceeding whichever of the following is less:
- 25% of your disposable earnings
- The amount by which your disposable earnings exceed 30 times the federal minimum wage (currently $7.25 per hour)
For example, let’s say you earn $75,000 per year, and your disposable earnings are $1,000 per week. That means you’ll pay either:
- 25% of that take-home number ($250), or
- $782.50 ($1,000 take-home – $217.50, which is 30 times the federal minimum wage)
You’ll be subject to the lower number of $250.
Again, these apply to most consumer debts. Things like alimony or certain bankruptcy court orders can have different limitations.
State-specific wage garnishment rules
States also have their own wage garnishment rules. Some even lower the maximum amount and restrict garnishment for specific debts. All to say, you’ll have to check your specific state rules to see how much you may truly end up paying.
How wage garnishment shows up in your paycheck
When your paycheck is formally garnished by a collector, it will appear as a line on each paycheck. Expect to find it alongside other deductions, such as your federal and state taxes. The exact wording may vary, and it can also depend on the specific reason for garnishment.
For example, if your wages are being taken to pay back taxes, your paycheck may note “Garnishment—Tax Payment.” Or, if the reason is child support, it may simply say “Child Support.” Typically, you’ll find something like “Garnishment” or similar.
What to do if your wages are being garnished
As you can see, wage garnishment can seriously impact your budget. So what can you do to shake off this financial burden as quickly as possible?
Immediate steps to take
Wage garnishment isn’t something that sneaks up on you. It’s something you’ll have been expecting after multiple written notices, a lawsuit, and a court judgment. Still, there are steps you should immediately take once it’s in effect:
- Overhaul your budget: Until the end of the wage garnishment, you’ve now got considerably less money to live on. Create a bare-bones budget that prioritizes your needs. You may even consider talking to a credit counselor for professional advice.
- Confirm who is garnishing your wages: You can ask your company for a copy of the wage garnishment order, just to ensure that the expected collector is the one taking your money.
- Check the amount: Remember to investigate your state’s unique wage garnishment rules to ensure that the deducted amount doesn’t breach those limits.
- Quickly act to request exemptions: You may get anywhere from a few days to weeks to file an objection, claim a hardship exemption, etc.
Long-term ways to stop wage garnishment
Wage garnishment typically stays with you until your debt—including interest, fees, and court costs—are paid in full or the collector ends the order. There’s no “easy” way to stop it. You’ll usually have to:
- Pay what you owe (or settle): Once your debts are paid, there is no need to continue garnishing your wages. Some collectors may be willing to settle your debt for less than you owe—but be very particular about the company you choose. Read our guide to the best debt relief companies to ensure you’re being represented by a reputable organization. Just note that debt settlement will wreck your credit score.
- Enroll in a debt management plan (DMP): After chatting with an accredited nonprofit credit counselor, you may be advised to enroll in a debt management plan. This rolls your multiple debts into one, often for a lower interest rate. See if your creditors are willing to end wage garnishment if you enroll in a DMP as a method of repayment.
- File bankruptcy: The most severe form of debt relief is bankruptcy, which usually stops most wage garnishments immediately and either eliminates or restructures your eligible debts to avoid future garnishment. This, too, wrecks your credit score—so it’s a last resort.
The takeaway
Wage garnishment occurs when your employer is ordered by a court or government agency to withhold a portion of your paycheck and instead send it to repay an outstanding debt of yours. For most consumer debts, a collector can take up to 25% of your disposable earnings or your total disposable earnings minus 30 times the federal minimum wage (whichever is less).
You’ll have to repay the debt in full (on your own or through a DMP), settle your debt, or have it discharged with bankruptcy.
Frequently asked questions
How do creditors get permission to garnish your wages?
For most consumer debt, creditors get permission to garnish your wages by suing you and winning. A court then orders your employer to take a portion of your earnings and channel them toward paying the creditor until your debt is repaid.
How is “disposable income” calculated for wage garnishment?
Also called “disposable earnings,” this number is your take-home pay after other deductions, such as federal and state income tax, local income tax (if it applies), Social Security, Medicare, etc.
Can my wages be garnished without a court judgment?
Your wages can’t be garnished to repay consumer debt without a court judgment. However, garnishment for things like federal and state taxes, student loans, child support, and alimony can be garnished through administrative authority—not a lawsuit.
Can I negotiate with a creditor to avoid wage garnishment?
It’s possible to negotiate with a creditor to avoid wage garnishment. You may see if they’ll accept a lower repayment figure if given in a lump sum, reduce interest rates, or perhaps waive some fees to make your path to repayment more realistic.
Will wage garnishment hurt my credit score?
The process of wage garnishment doesn’t itself affect your credit score. However, if you’re staring down the barrel of wage garnishment, odds are that your credit score is already suffering. When you fail to make on-time payments, your credit score will begin to freefall.
