Wage Garnishment Order: When and How Wages Can Be Withheld

The legal definition of wage garnishment involves the diversion of a portion of a debtor’s compensation to a third party before the debtor receives their paycheck. This is executed through a Wage Garnishment Order, which is served upon the employer, who then acts as a garnishee. From a legal standpoint, the employer becomes responsible for ensuring the correct amount is deducted and sent to the appropriate party.

The process usually begins after a creditor wins a lawsuit and obtains a money judgment. Once the judgment is final, the creditor applies for a Wage Garnishment Order. The court then sends this order to the employer, who must begin withholding funds from the very next pay period. The employer continues this process until the debt, including interest and legal fees, is fully satisfied or the order is vacated.

Most wage garnishment actions require a court judgment. This means the creditor must have sued the debtor and proved the debt in court. However, certain government related debts do not require a court order. For instance, the IRS or a state taxing authority can issue an administrative Wage Garnishment Order for unpaid taxes without first filing a lawsuit. Similarly, federal student loans and child support obligations can often be garnished through administrative channels.

Common obligations that result in the issuance of a Wage Garnishment Order include:

• Unpaid credit card balances and medical bills.
• Personal loans and auto loan deficiencies.
• Child support and alimony payments.
• Federal and state tax debts.
• Defaulted federal student loans.

Title III of the Consumer Credit Protection Act (CCPA) sets the ceiling for most wage garnishment actions. 

Generally, the weekly limit for ordinary debts is the lesser of:

• 25 percent of the employee’s disposable earnings.
• The amount by which disposable earnings exceed 30 times the federal minimum wage.
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For certain debts like child support, these limits can rise significantly, sometimes reaching 50 to 60 percent of disposable income.

The amount subject to a Wage Garnishment Order is calculated based on disposable earnings, not gross pay. Disposable earnings are the funds remaining after legally required deductions are made.

Upon receiving a Wage Garnishment Order, an employer must:

• Verify the employment status of the debtor.
• Notify the employee about the impending withholding.
• Calculate the correct amount based on federal and state limits.
• Remit the funds to the creditor or court as directed.

Federal law provides critical protections for employees facing wage withholding for debt. An employer is prohibited from firing an employee because their wages have been garnished for any single debt. However, these protections may weaken if the employee is subject to multiple Wage Garnishment Orders from different creditors over time.

This is the standard process for private debts such as credit cards or personal loans. It requires a lawsuit, a judgment, and a subsequent application for a Wage Garnishment Order. It offers the debtor the most opportunity to present defenses before the withholding begins.

Garnishments for taxes, student loans, or child support often use streamlined administrative procedures. Because these involve public policy or government funds, the limits on wage garnishment may be higher, and the procedural requirements for the creditor are often less burdensome than those in private litigation.

Debtors can file a claim of exemption or a motion to stay the garnishment based on financial hardship. If the debtor can prove that the garnishment of wages prevents them from affording basic necessities like housing or food, a judge may reduce the amount of the withholding or stop it entirely.

Other methods for stopping wage garnishment include:

• Negotiating a Payment Plan: 
• Creditors may agree to a voluntary payment schedule in exchange for withdrawing the Wage Garnishment Order.
• Filing for Bankruptcy: 
• The moment a bankruptcy petition is filed, an automatic stay goes into effect, which legally prohibits creditors from continuing with wage garnishment.
• Challenging the Underlying Judgment: 
• If the original lawsuit was flawed (for example, due to improper service), the debtor may be able to vacate the judgment and the resulting garnishment order.