When you can’t pay a creditor, wage garnishment to pay the debt can make tough times even tougher. Wage garnishment is when a creditor or the government legally requires your employer to deduct a portion of your paycheck until your debt is paid.
However, creditors can’t take as much as they please from your hard-earned wages. They must comply with consumer protection laws that limit the amounts your employer deducts. We’ll explain what wage garnishment is, how it works, its limitations, and options to stop or avoid it.
Table of Contents
What does the garnishment of wages mean?
When you default on a debt, wage garnishment is a court-ordered or other legal process in which your employer or the government withholds a portion of your discretionary wages to pay your creditor until the debt is repaid.
By law, banks, credit card companies, and other consumer creditors can require your employer to deduct up to 25% of your disposable income from each paycheck until you pay off what you owe.
The federal and state governments can also garnish your wages for taxes, child support, or other federal agency debts.
What are disposable earnings?
Disposable earnings is the amount left after employer deductions for:
- Federal, state, and local income taxes
- Medicare
- Social Security
- State unemployment insurance tax
Deductions not required by law aren’t subtracted from your gross earnings when determining your disposable earnings. These deductions include:
- Health insurance
- Life insurance
- 401(k) and other retirement plan contributions (unless legally required)
- Union dues
- Savings bond purchases
- Charitable cause contributions
- Payroll advances
- Merchandise purchases
How does wage garnishment work?
Most wage garnishments are court-ordered. The garnishment order requires your employer to withhold a percentage of your disposable earnings and pay the withheld amount directly to the creditor. However, an administrative wage garnishment (AWG) for a debt owed to a federal agency doesn’t require a court order.
With an AWG, a non-federal employer must withhold a portion of your paycheck and pay it to the federal agency you owe money to on a delinquent non-tax debt.
Types of wage garnishments include money owed for:
- Consumer debt, such as credit cards, medical bills, and bank loans
- Child support and alimony
- IRS or state tax collection
- Non-tax debts owed to the federal government
What types of wages can’t be garnished?
Certain types of wages or other income are protected by federal exemptions if you receive the funds via direct deposit into your bank account:
- Veterans benefits
- Servicemember pay
- Military annuities and survivor benefits
- Federal student aid
- Social Security retirement benefits
- Supplemental Security Income (SSI)
- Civil service and federal retirement and disability benefits
- Railroad retirement benefits
- Federal Emergency Management Agency (FEMA) financial assistance
When your bank gets a garnishment order for money in your bank account, the bank must review your account history for direct deposits of federal benefits. If you received federal benefits by direct deposit in the last two months, the bank must leave the amount of two months’ worth of benefits in your account for you to use.
For example, if you receive a monthly Social Security benefit of $1,000 and get the last two months of benefits by direct deposit, you could still access $2,000 in your account. However, if you received your benefits by check and deposited the money in your bank account, the bank isn’t required to protect your money.
In that scenario, you’d have to prove in court that the payments shouldn’t be garnished because they’re protected federal benefits.
How much of your wages can creditors garnish?
The Consumer Credit Protection Act (CPPA) limits how much creditors can garnish from your wages for any pay period or workweek. The deduction percentage depends on the type of debt.
For medical bills, credit cards, personal loans, and other consumer debts, your employer can deduct the lesser of up to 25% of your disposable earnings or the amount by which your disposable earnings exceed 30 times the current federal minimum wage of $7.25.
For example, if you’re paid weekly and disposable earnings are:
- $217.50 (30 x $7.25) or less: Your wages can’t be garnished.
- More than $217.50 but less than $290: The amount over $217.50 and less than $290 can be garnished.
- More than $290: The maximum garnishment is 25%.
However, if you owe child support or alimony, up to 50% of your earnings can be garnished if you’re supporting a child or a different spouse. If not, up to 60% of your disposable earnings can be garnished. If you’re more than 12 weeks late on support payments, an additional 5% may also be garnished.
The maximum wage garnishment for federal student loans or other non-tax government debts is 15% of your disposable earnings. CPPA garnishment limitations don’t apply to federal or state tax debts or certain types of bankruptcy court orders. If your state law on wage garnishment differs from the rules of the CPPA, the law with the lower garnishment amount applies.
| Type of debt | % of wages |
| Credit cards, personal loans, medical bills, and other debts | The lesser of up to 25% of disposable earnings or the amount that exceeds 30x the current federal minimum wage of $7.25 |
| Child support and alimony | Up to 50% of disposable earnings if supporting a child or another spouse or up to 60% if not; +5% may also be garnished if payments are more than 12 weeks late |
| Federal student loans and other federal non-tax debts | Up to 15% of disposable earnings |
| Federal and state income taxes | Up to 50% if supporting a child or spouse, up to 65% if not, and up to 65% if garnishment is for a support order; some states may garnish up to 100% |
If my client were facing wage garnishment, I’d first advise that they contact the creditor to negotiate a payment plan or reduced debt. This may be better than garnishment and lessen the financial strain. If garnishment is unavoidable, review monthly expenses and cut nonessentials until it’s completed or your finances improve.
Payroll garnishment rules
When a court or a federal agency orders wage garnishment, the payroll administrator must comply with certain rules for withholding wages. Rules for wage garnishment vary by state, and payroll administrators must comply with state and federal laws for withholding a portion of disposable earnings.
Generally, your employer’s payroll department or administrator must carry out the following:
- Respond to the garnishment order from the court or agency.
- Calculate the garnishment amount, base wage amount, and any exclusions according to federal and state regulations.
- Make accurate withholdings on time, following state and federal regulations.
- Process and prioritize multiple garnishments for one employee.
- Respond to employee questions and concerns.
- Communicate with agencies, attorneys, and creditors when necessary.
Are garnishments pretax?
No, garnishments aren’t deducted from gross pretax earnings. Wage garnishment deductions are withheld from your disposable earnings after required federal and state income taxes, and your share of Social Security, Medicare, and state unemployment insurance taxes are deducted.
How does it show up on my pay stub?
You can find amounts withheld for wage garnishment on your pay stub under “garnishment,” “deductions,” or “other deductions.” The reason for the garnishment, such as “child support,” may also be shown with the withheld amount.
Will wage garnishment affect my job?
The CPPA prohibits your employer from firing you if your wages are being garnished for any one debt. However, an employer is legally allowed to fire you if your wages are garnished for a second debt or additional debt.
How to check your wage garnishment balance and find garnishment information
If your wages are garnished, you can check your garnishment balance to keep track of how much you owe and other information. You can also check your balance by contacting your creditor.
Your company payroll department or state wage garnishment authority may be able to provide your outstanding balance. You can also review your wage garnishment paperwork for the full amount owed and the period of wage garnishment.
How to stop wage garnishment
You may be able to stop wage garnishment and the strain a reduced paycheck puts on your budget. The best way is to pay the debt in full if you can. Is borrowing money from a family member or friend an option?
If you can’t pay the debt in full, your options might include:
- Negotiate a settlement with the creditor for a lower amount you can pay in full within the allowed time frame of the court order or administrative wage garnishment notice.
- Try to negotiate new repayment terms instead of wage garnishment.
- Challenge the wage garnishment if you think it’s unfair, inaccurate, or doesn’t allow for eligible exemptions above by filing an answer with the court.
- Contact a consumer law or debt collection attorney for help understanding state and federal wage garnishment laws and negotiating with creditors for a repayment plan or settlement for a lower amount.
When to consider debt relief companies
You may want to explore solutions such as debt relief and tax relief companies. Debt relief companies negotiate with your creditors to settle your debts for a lower amount. However, they can’t guarantee that your creditors will agree to a settlement.
For example, National Debt Relief offers a debt relief program where you make monthly deposits into an FDIC-insured escrow account set up by the debt relief company. Once the balance is high enough, the company begins negotiating a settlement for a reduced amount.
You may have success with a debt relief company. However, your credit could take a significant hit because you must stop paying your creditors while the escrow account balance grows. Debt settlement companies also charge high fees for each settlement.
Always make sure to factor in all fees to make sure you may come out ahead before enrolling in a debt relief program. And if you decide it makes sense for your situation, be sure to choose a well-rated, reputable debt relief company.
Tax relief companies
The best tax relief companies can work with the IRS or your state tax authority to settle your tax debt for a lower amount or help you set up a repayment plan with the IRS or your state.
For example, Anthem Tax Services will try to negotiate the debt for a lower amount or a repayment plan. If the company isn’t able to settle your tax debt or set up a repayment plan, it offers a 100% full refund of fees (certain administrative fees not included).