- Wage Garnishment
- Wage garnishment is a legal tool that allows a lender, legal entity or institute to take money directly from your paychecks to cover debts you owe.
What is Wage Garnishment?
Wage garnishment is a way for companies, the government, or individuals to collect a debt they’re owed directly from your paycheck. If you don’t pay off debt that you owe, that debt can be sold to a collections agency. If the collections agency can’t get you to pay, they’ll take you to court, where a judge can order that your wages be garnished. Judges can also order wage garnishment as part of divorce or child support cases, and the government can choose to garnish (or take part of) your wages if you owe money in taxes or student loan debt.
If your wages are garnished, a portion of your paycheck will be withheld and given to the collections agency (or whatever entity you owe) on each payday until the debt is entirely paid off. There is also non-wage garnishment, where the funds are taken directly from your bank account.1
What portion of your wages can be garnished?
There are limits to the amount of your paycheck that can be garnished. According to the Consumer Protection Act, a collections agency can’t take more than a quarter of your disposable income or any amount greater than 30 times the federal minimum wage. Some states have different regulations that set different limits on how much of your paycheck can be taken.2
Can your employer fire you over Wage Garnishment?
Because the money is being taken directly out of your paycheck, your employer will know when your wages are being garnished. In fact, they’re the ones actually doing the garnishing. They cannot, however, fire you because of a wage garnishment—if it’s your first wage garnishment. If you have additional garnishments on top of the original one, you lose that protection and you can be fired.3
Does Wage Garnishment affect your credit score?
Technically, wage garnishments do not appear on your credit score.
Wage garnishment is often the result of failing to make necessary payments and missing those payments will negatively affect your credit score. In fact, if you borrow money, fail to pay it back, and are sent to a collections agency, then your credit score will be negatively affected. It’s something you want to avoid, for the sake of your credit and your bank account.4
What kind of debts can lead to Wage Garnishment?
Many different kinds of debt can lead to wage garnishment. One common scenario comes with student loan debt. If you stop making your federal student loan payments, the U.S. Department of Education can send your employer a notice requiring them to garnish your wages to pay off the debt.5
Unpaid credit card debt can also lead to wage garnishment as can unpaid taxes. The most common reason wage garnishment occurs, however, is to pay for child support.6
How can you get out of Wage Garnishment?
There isn’t any special secret to getting out of wage garnishment. You have to pay back the debts you owe. Certain kinds of income, like social security, child support, and alimony, are exempt from wage garnishment.7
The best way to avoid wage garnishment would be to avoid taking out any loan or credit if you aren’t absolutely sure that you’re able to pay it off. As for student loans, make sure that you’re always making your payments on time. Many lenders will work with you to find payments that are affordable, because it’s in their best interest to be paid, even if it’s a small amount. So don’t be afraid to reach out to your lender to discuss your options, as avoiding them will likely lead to wage garnishment.
Another way to avoid having your wages garnished would be to find a part-time job, or other side hustle in order to make enough extra cash to make the payments you owe. Check out our blog to learn more about side hustles, and earning extra cash.
The best way to escape wage garnishment is to not let it happen in the first place. Budget, manage your money, and pay your bills on time to avoid being sent to debt collectors. If you can’t manage your debts, speak to your lenders or work with a debt counselor to restructure your debt.
1 Diaz, Cynthia and Sherrier, Julie. “How Wage Garnishment Works- And How To Avoid It.” Creditcards.com accessed on March 30, 2017 at http://www.creditcards.com/credit-card-news/wage-garnishment-for-credit-card-debt-1282.php
2 Irby, LaToya. “How Wage Garnishment is Used to Collect Debts.” The Balance accessed on March 30, 2017 at https://www.thebalance.com/how-wage-garnishment-is-used-to-collect-your-debts-960568
3 “Can You Be Fired for Wage Garnishment?” Top Tax Defenders accessed on March 30, 2017 at https://www.toptaxdefenders.com/blog/bid/195640/Can-You-Be-Fired-for-Wage-Garnishment
4 Skowronski, Jeanine. “Credit Q & A: Will a Wage Garnishment Affect My Score?” The Street accessed on March 30, 2017 at https://www.thestreet.com/story/12788656/1/credit-qa-will-wage-garnishment-affect-my-score.html
5 Lockert, Melanie. “Wage Garnishment For Student Loans, Or How The Government Can Take 15% of Your Paycheck To Cover Missed Payments.” Student Loan Hero accessed on March 30, 2017 at https://studentloanhero.com/featured/wage-garnishment-student-loans-how-the-government-can-take-paycheck/
6 DiGangi, Christine. “Who’s Most Likely to Have Their Wages Garnished?” Credit.com accessed on March 30, 2017 at http://blog.credit.com/2014/09/whos-most-likely-to-have-their-wages-garnished-96041/
7 “Using Exemptions to Protect Your Wages From Garnishment.” Nolo accessed on March 30, 2017 at http://www.nolo.com/legal-encyclopedia/using-exemptions-protect-your-wages-from-garnishment.html#