Garnishment is a last resort and often can be an effective tool for creditors looking to collect money from you. Garnishment is when your creditors get a court's order to take your wages or property that are held by third parties, such as your employer or a bank.
Know what to expect if you have unpaid debts, and how your creditors may try to use garnishment. There are several federal and state laws protecting you to make sure garnishment is used in the right way.
Garnishment Types and Options
When someone is looking to collect a debt, whether it's an everyday bill or a court judgment, there are several ways it might be paid. The person owing the debt, called a judgment debtor if there's been a court judgment, can just pay it. The creditor hopes it's just that simple.
When someone doesn't pay a debt voluntarily, a creditor may turn to garnishment as a last resort. The two main types of garnishment are wage garnishment and vehicle garnishment. Creditors look for payment from wages held by your employer or in your bank accounts, or property such as your car.
Vehicle garnishment can lead to repossession, but in many states, creditors can't repossess and sell vehicles if the equity (its value minus what's owed on it) is under a certain amount (around $2,000 or a little more in most states). In many states, a lien is placed on the vehicle to secure payment. Lien laws, rather than garnishment laws, control how a car, truck, boat, etc., is accessed.
Wage garnishment is when the sheriff presents your employer with garnishment papers, ordering it to make payment in a certain amount from each paycheck. Your employer doesn't have a choice and and could be liable for payment if it doesn't obey the garnishment order.
Wage garnishment is often used if you're working steadily at more than the minimum hourly wage and there aren't other claims against your wages already.
Limits on Garnishments
Protected Income Sources and Amounts
Federal law limits garnishment from your paycheck(s) to a percentage of your "disposable earnings." This is your pay minus required deductions, like state and federal taxes and Social Security withholdings.
Income sources that can't be garnished include:
- Social Security benefits
- Retirement plan benefits
- Public assistance benefits
And, unless the judgment is for child or spousal support, your income can't be garnished if it comes from:
- Workers' compensation awards
- Unemployment or disability benefits
Garnishment and Job Safety
Federal law gives you another protection: You can't be fired because you have a garnishment judgment for one debt. Your employer could be punished for violating the law, including fines of up to $1,000 and imprisonment for up to one year. However, you can be fired for having more than one wage garnishment.
Your Protected Funds and Financial Accounts
Where you keep protected funds matters. If you keep these funds in a bank account and they are readily available for your day-to-day needs, they can't be garnished. For example, the nature of your Social Security benefits doesn't change when deposited in your checking account.
However, if you place exempt funds in some type of permanent investment, a creditor may be able to garnish them.
Child and Spousal Support
Veterans' benefits, military retirement, most workers' compensation benefits, and Social Security old age, survivors' and disability benefits can all be garnished if the debt is for a child or spousal support judgment. Also, a greater portion of your pay can be taken for these debt types.
Garnishments in Bankruptcy
Garnishment can be stopped through the automatic stay process if you file for bankruptcy . You'll then receive your full paycheck and possibly completely "discharge" or erase the debt. However, you'll have the bankruptcy charge on file, which can hurt you in other ways.
When you know about garnishment as a debt collection method, you're better prepared to face and manage your debt issues, and exactly how garnishment gets money out of your pay.
Questions for Your Attorney
- A creditor is threatening to sue me and garnish my wages. Is there a way to settle the dispute?
- I work and go to school part-time. Can one of my creditors garnish my wages? If so, for how much?
- I'm worried about garnishment and my bank accounts. Can I empty those accounts and hide the money?