Wage garnishment is a complex issue with nuanced rules that can make payroll managers nervous. However, it’s an important part of managing payroll and complying with legal requirements.
The amount of an employee’s paycheck that can be garnished depends on the type of debt and state and federal laws. Creditors can only garnish a portion of an employee’s disposable earnings, which is the money left over after legally mandated deductions.
What Is A Garnishment?
A garnishment is a legal process in which an employer must withhold a portion of an employee’s paycheck to pay off an outstanding debt. This is most commonly for child support, back taxes, and student loans, but can also be due to credit card balances or medical bills. Garnishments typically begin after a creditor files a lawsuit and receives a court order.
Once a wage garnishment payroll is in place, an employer must comply with the court’s instructions and state and federal laws. This is why employers need a streamlined payroll process that can handle these additional requirements. Ideally, an HR expert or outside legal counsel can help with the complexities of garnishment law.
Employers should carefully review and respond to the statutory response form often included with each garnishment order. Failure to do so may result in fines or even jail time. If an employer receives multiple wage garnishment orders for the same employee, there are rules in place for prioritizing which ones get paid first. Generally, priority is given to child or spousal support and tax-related garnishments.
There are limits on how much can be taken from an employee’s wages in a single paycheck. These vary based on the type of debt and federal or state laws.
How Can I Stop A Garnishment?
Once a creditor wins a judgment against you, they can get your employer to deduct money from your paycheck and send it directly to them to pay off the debt. This can be very distressing and financially stressful if you struggle to pay your bills.
One option is to call the creditor and see if they are willing to work out an alternative payment arrangement that won’t involve garnishment. However, many creditors are unwilling to settle for anything less than the amount you owe them.
Another option is to speak with a nonprofit credit counselor to see your options for working out a debt repayment plan to meet your needs. These credit counselors can review your finances and recommend the best way to deal with debt collectors.
If you do not want to speak with a credit counselor, you can also file an objection to the garnishment order with the court. This is usually free and can be done online or through your local clerk’s office. The form will ask you to explain why you think the garnishment is improper. For example, you may be able to prove that a portion of your wages are exempt under federal or state law.
What Are the Garnishment Limits?
The Consumer Credit Protection Act provides limits on the amount of an employee’s wages that can be garnished. The limit depends on the type of debt, how much the worker owes, and how long they’ve defaulted. It also takes into account whether the worker supports a spouse or child. Finally, the limit may include a certain percentage of the workers’ disposable income for general living expenses (including rent, food, and utilities).
To garnish an employee’s wages, a creditor must file a lawsuit, win in court, and receive a money judgment. From there, they can request that the sheriff serve a Writ of Garnishment to the employee’s employer. Once the Writ is served, the employer must start withholding a percentage of the debtor’s paycheck each pay period until the debt is satisfied or the garnishment expires.
Wage garnishments can frustrate employees because they can significantly impact their budgets and daily lives. This is why employers should always follow federal and state wage garnishment guidelines, which can vary widely by state. They should also use a payroll platform that automatically calculates the amount to withhold and remit each time an employee’s paycheck is processed. In addition, they should keep records of the garnishment and provide copies to the creditor or legal authority as needed. Then, they should communicate with the employee if their garnishment order changes or if they can settle their debt.
How Can I Challenge a Garnishment?
Some creditors and debt collection agencies can garnish or take money directly from an employee’s paycheck. This includes creditors who have won a judgment in court and those who are collecting child support or back taxes. However, state and federal law limits how much of an employee’s income can be garnished.
The amount of an employee’s wages that can be garnished is based on disposable income, defined as total compensation minus mandatory deductions like federal and state taxes, social security and Medicare contributions, and unemployment insurance. Tips, bonuses, and sales commissions are generally not considered earnings for wage garnishment purposes. Still, service charges and gratuities may be included in disposable income if the creditor can show that these expenses are legitimate.
If an employee believes their garnishment order is unlawful, there are a few different procedures for challenging it. These processes vary by state and type of debt. The employee must file a written objection and claim any exemptions available under separate state or federal laws within a short period after being served with the garnishment notice.
If you are facing a garnishment, you should not delay seeking legal help. In addition to pursuing any available exemptions, a lawyer can provide advice on how to work with the creditor or debt collection agency to arrange for a repayment plan.