Creditor
Wages
Wages summary:
Wages are payments you receive from your employer for working at your job.
If you fall behind on debt payments and a creditor wins a judgment against you, it might be granted a court order to garnish your wages.
For consumer debts, like credit cards and personal loans, wage garnishment is limited to 25% of your disposable income.
Wages Definition and Meaning
Wages are payments you receive from your employer for working at your job. If you fall behind on your debt and a creditor receives a judgment against you, it may be able to garnish your wages, which means a court orders your employer to withhold a portion of your earnings and send it directly to the creditor. Not all of your paycheck is subject to wage garnishment, though, and you’re afforded a few other protections.
Key Attributes of Wages
Wages are monetary payments your employer provides you in exchange for doing your job. Your wages are earnings that your take-home pay and income taxes are based on. Wages can include the following types of compensation, according to the U.S. Department of Labor:
Hourly earnings
Salary
Commissions
Bonuses
The rules for tips are a bit more complicated, however. Tips often don’t count as wages for the purpose of garnishment.
Wage Garnishment: Key Components
Wage garnishment is a legal process that requires an employer to deduct money from an employee's paycheck and send it to a creditor to repay a debt. For most types of debt, like credit cards and personal loans, a creditor has to win a judgment against you and receive a court order to garnish your wages. However, if you owe the government money—for example, back taxes or delinquent federal student loans—it’s possible that your wages could be garnished without a court proceeding.
What Wages Can Be Garnished?
The amount of your wages that a creditor can garnish is based on your disposable income, which is the money you have left over after required deductions for federal and state taxes.
Under federal law, a creditor can only garnish your wages for consumer debt (like credit cards, loans, and medical bills) by the lesser of:
25% of your disposable earnings
The amount of weekly earnings above 30 times the federal minimum wage of $7.25 per hour, up to 25%
Here’s an example of what portion of your wages can be garnished for consumer debt if you’re paid weekly:
If you earn $217.50 (30 times the federal minimum wage of $7.25 per hour): No garnishment can occur.
If you earn between $217.50 and $290: The creditor can only garnish the amount of wages above $217.50.
If you earn $290 or more: The creditor can garnish up to 25% of your wages.
Some states have higher thresholds for wage garnishment, meaning they protect additional wages from garnishment.
Wage Garnishment Rules for Other Types of Debt
The thresholds above only apply to consumer debt, like credit cards and personal loans. Here’s a breakdown of how much of someone’s wages can be garnished for other types of debt:
Unpaid child support: Up to 50% of disposable income if you’re supporting another child, or up to 60% if you’re not.
Delinquent federal student loans: Up to 15% of your disposable income.
Back taxes: The rules can get a bit complicated and vary by state, but the maximum is 50% of your disposable income.
Regardless of what type of debt you owe, your employer can’t fire you over a single wage garnishment order. However, this protection doesn’t apply if you have multiple wage garnishment orders against you. Taking proactive steps to work with your creditors or seeking debt relief can help you avoid having part of your paycheck taken for unpaid debts.
Wages FAQs
It's highly unlikely that you can. Courts rarely reverse debt judgments.You need to act before the judgment.
Negotiate with the creditor to get the hearing called off. Or retain an attorney specializing in consumer debt law to act on your behalf. Or find a reputable credit counselor. Once the judgment is in place, your only hope is to pay the creditor what's owed (or a lower settlement sum) or negotiate a repayment plan.
Nearly all states exempt a part of your income from garnishment. But in most cases, you have to ask the judge at your hearing to apply for exemptions. If you fail, your state's exemptions may not apply. In some states, the amount exempted is pitifully low. Most federal benefits are exempt from garnishment other than in exceptional circumstances, such as when that garnishment is happening because you owe back taxes or child support payments.
The problem here is identifying which deposits are federal benefits and which are other forms of income. The easiest way to avoid confusion is to have a separate account in which all your exempt benefits are directly deposited and only those benefits. That way, anyone can see by glancing at your statements that the account's contents are exempt.
If your bank account is frozen, dispute the levy as soon as possible. Your account will remain frozen until the dispute is resolved, but the creditor won’t get your funds if your dispute is valid. Reasons for disputing a bank garnishment include:
Error: you don’t owe the money
The statute of limitations has passed, and the debt is uncollectible
The creditor is already garnishing your wages
Some or all funds in your account are exempt under federal or state law
You’re a victim of identity theft, and the past-due account is not yours
Other ways to stop a bank garnishment include filing bankruptcy or settling with the creditor for an amount or payment that you can afford.
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