Published in: Banks | Dec. 31, 2019

What Is Wage Garnishment?

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Here's how wage garnishment works -- and what you can do to prevent it.

When you fall behind on your bills, the consequences can be dire. Not only can failing to pay hurt your credit score, but it can also, in more extreme cases, allow your creditors to claim some of your wages before they land in your pocket. That situation is known as wage garnishment, and here, we'll discuss how it works -- and how you can avoid it. 

How does wage garnishment work?

Wage garnishment occurs when a government entity or creditor that's granted a court order instructs your employer to withhold a certain portion of your paycheck. That withheld amount then gets sent to the entity or creditor you owe money to until you've repaid the debt in question fully. 

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Who can garnish wages?

The IRS can garnish your wages if you fail to pay your tax debt, and the U.S. government can garnish your wages if you default on federal student loans. You may also have your wages garnished if you fail to pay alimony or child support. 

On top of that, if a creditor sues you for not paying your debts and wins, that creditor could get a court order calling for your wages to be garnished. Such creditors could include private student loan originators and credit card companies.

How long before a creditor can garnish wages?

Usually, when you fall behind on debt payments or financial obligations, you're given a chance to make good on them before wage garnishment comes into play. For example, with federal student loans, you're not considered to be in default on your debt until you go 270 days without making a payment, and even then, you get a 30-day notice of the government's intent to garnish your wages. Similarly, once the IRS decides to come after your wages, you'll get a 30-day notice, during which time you'll have the option to pay your tax debt and avoid garnishment. 

Creditors like credit card companies, meanwhile, need to sue you in court for nonpayment of your debt and win before your wages can be garnished. The same holds for private student loan providers. But usually, these entities will attempt to collect your debt in other ways before spending the resources on a lawsuit that results in garnishment. For example, if you owe a sum of money on a certain credit card, that issuer may agree to an extended repayment plan or even a debt settlement if you reach out and proactively attempt to resolve the situation before it goes to court. 

How much of my wages can be garnished?

The amount of wages you can have garnished depends on who the creditor at hand is. If it's the government coming after your paycheck for not paying your student loans, it can take 15% of your weekly disposable income. The same holds true for the IRS. Your disposable income is your wages minus mandatory deductions -- namely, income/Social Security taxes on your earnings. 

In the case of wage garnishment for child support or alimony, you can have up to 50% of your weekly wages withheld if you're supporting another child or spouse; otherwise, that percentage climbs to 60%. And for general creditors (like credit card companies), that percentage is capped at 25% of your weekly disposable income, or the amount by which your weekly earnings total more than 30 times the minimum wage of $7.25 an hour -- whichever is lower. 

If your weekly disposable income is $217.50 or lower, your wages can't be garnished. If it's $290 or more, you'll lose 25%. And if it's between $217.51 and $289.99, any amount above $217.51 can be garnished. These garnishment limits don’t apply, however, to the IRS for unpaid taxes or to the government for unpaid student loans. They also don’t apply to unpaid alimony and child support.

How can I stop wage garnishment?

Creditors can't come after your wages without giving you warning. Once you're notified of an intent to garnish your wages, you can reach out to the creditor or entity at hand and attempt to avoid that scenario by either paying off the sum you owe, or working out a new repayment agreement. 

If you feel the wage garnishment order that's entered against you was made erroneously (say, because you already paid the debt in question), you do have the right to challenge a court order. But you'll generally need to act quickly to avoid having that order acted upon, and you may need to enlist the help of an attorney to fight it. 

Filing for bankruptcy is another way to stop wage garnishment. But there are consequences to going that route, and it may not be the best solution for you. An attorney can advise on whether bankruptcy is the right choice based on your specific circumstances. 

Do wage garnishments affect credit scores?

Wage garnishments can stay on your credit report for up to seven years, thereby bringing down your credit score and making it harder to borrow money when you need to. That said, bankruptcy filings also stay on your credit record for up to seven years for a Chapter 13, or up to 10 years for a Chapter 7, so from a credit score perspective, choosing bankruptcy as an alternative to wage garnishment may not work out well. 

How can I avoid wage garnishment in the first place?

The best way to never have to worry about having your wages garnished is to keep up with your bills, and reach out to your creditors proactively once you fall behind. If you owe the IRS money, for example, the agency will generally work with you to get on an installment plan so you can pay your tax debt over time. If you're falling behind on federal student loans, you can apply for an income-driven repayment plan, or possibly even defer payments for a period of time to avoid default. And if you're behind on your credit card's minimum payments, call your issuer and ask for leeway. 

At the same time, work on building an emergency fund so you have money in a savings account to tap for bills that start to pile up. Having some cash reserves could help you prevent wage garnishment, not to mention sparing you a world of stress. 

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