Types of Garnishments

Garnishment, also known as wage garnishment, is the process through which money  is lawfully removed from your salary and delivered to another party. It is a legal process in which a third party is instructed to deduct payments directly from a borrower’s income or bank account. 

Typically, the third party is the borrower’s employer, and this person is referred to as the garnishee. Employers are not permitted by law to fire a worker in order to avoid processing a garnishment payment. Garnishments are used to collect debts such as unpaid taxes, monetary fines, child support payments, and student loan defaults.

A garnishment is a court order that directs a third party to collect assets, generally income from employment or money in a bank account, in order to pay back an overdue loan. Wages can be garnished by the IRS without a court order. Except for unpaid taxes, late child support, bankruptcy orders, defaulted student loans, and voluntary work assignments, the Consumer Lending Protection Act restricts what can be taken from wages.

If the borrower is experiencing financial difficulty, he or she may be eligible for
assistance.

Categories of Garnishment:

Garnishment is classified into two categories:

• Creditors can lawfully demand your employer to send over a portion of your salary to pay off your debts through wage garnishment.
• Creditors can access your bank account through non wage garnishment, often known as a bank levy.

In order to garnish a borrower’s wages, a lender must normally get a court judgment establishing that the borrower owes money and has failed on payment. A court order is not necessary if the loan is an Internal Revenue Service (IRS) levy. If an individual owes the IRS $10,000 in delayed, unpaid taxes, the IRS may garnish his salary.

The IRS would then require that person’s employer to remit a percentage of his wages for a certain period of time until his tax obligation is entirely met. Garnishments can impair an individual’s credit rating since they are frequently used as a last resort to
recover loans and reveal a borrower’s negative repayment history.

What percentage of your pay can be garnished?

The Consumer Lending Protection Act specifies the amount of income that can be deducted from a person’s paycheck. The garnishment is equal to the lesser of the following:

• If the individual’s weekly disposable income exceeds $290, the amount is 25% of his or her weekly disposable income.
• Any sum larger than 30 times the weekly minimum salary of $217.50 ($7.25 x 30).
• Individuals with a weekly disposable income of less than $217.50 are not subject to wage garnishment. Individuals with a weekly disposable income between $217.50 and $290 can have any money over $217.50 garnished. A maximum of 25% of weekly discretionary earnings over $290 can be garnished.

Disposable income is defined as gross income less legally mandated deductions such as federal, state, and municipal taxes, as well as social security deductions. The Consumer Lending Protection Act garnishment restrictions do not apply to delinquent tax payments, child support, bankruptcy decrees, student loans, or voluntary salary allocations. Federal agencies and holders of federal student loans have the authority to garnish up to 15% of an individual’s wages.

If an individual has no other dependents to support, sixty percent of his or her salary might be taken for child support payments. When federal and state garnishment restrictions differ, the lesser garnishment limit applies. If a person suffers financial hardship as a result of wage garnishment, they may be able to make a claim to decrease the garnishment amount.

What can you do if your wages are garnished?

You have some rights during the wage garnishment process, but it is your obligation in most jurisdictions to be aware of and utilize these rights.

• The garnishment must be lawfully communicated to you.
• If the notification contains incorrect information or you feel you do not owe the obligation, you can register a dispute.
• Certain types of income, such as Social Security and veterans’ benefits, are not subject to garnishment as income. They may, however, be vulnerable to confiscation once in your bank account. You cannot be dismissed for having a single wage garnishment, but you will lose this protection if you have many garnishments. If you feel the verdict was made in mistake or is causing you excessive financial hardship, you can appeal it.

The laws governing garnishment vary widely across states. Your state may have extra safeguards that protect more of your income or bank account balance, or it may provide exemptions for circumstances such as being the head of a family with dependent children. In most circumstances, debtors must learn about and request exemptions on their own. Non Wage garnishment is less widespread, less regulated, and has fewer limits for creditors.