It can happen to anyone: You fall behind with your bills because of some financial calamity and the next thing you know, a creditor is lifting money from your paycheck -- money you desperately need for other living expenses. This is wage garnishment, and both federal and state laws set limits to how much creditors can take from you.
How Garnishment Works
Most creditors can't garnish your wages without first suing you in court and getting a judgment against you, but after a creditor has a judgment, it can ask the court for a garnishment order and serve it on your employer. When your employer receives the order, he's legally obligated to withhold a percentage of your pay and send it to your creditor.
State vs. Federal Law
Federal law is the benchmark when it comes to garnishment limits. States can't let creditors take any more than what is provided for under Title III of the Consumer Credit Protection Act, but if your state's laws are kinder than the terms of the CCPA, you catch a break, because these would prevail. The legal website Nolo offers a comprehensive database that can tell you what the limits are where you live. Federal law is detailed in Title 15 of the U.S. Code, so you can compare one against the other.
Federal law caps garnishments at 25 percent of your disposable income. Creditors can't take more than this, and they may be limited to less. If you're a low-income earner, they can only take the portion of your paycheck that exceeds 30 times the national minimum wage of $7.25 an hour as of the time of publication.
Certain debts are exempt from the usual garnishment rules. If you owe child support or alimony, the federal garnishment limit increases to 50 percent of your disposable earnings, provided you’re supporting another family. If you’re not, the limit goes up to 60 percent, and if you’re behind in your payments by 12 weeks or more, these figures go up by another 5 percent. State law doesn’t usually differ much with regard to this type of debt.
A judgment isn’t required first for family support garnishments, tax debts or federal student loan garnishments. The U.S. Department of Education can only garnish 15 percent of your disposable income for student loans, and tax debt garnishments are determined by the Internal Revenue Service based on your standard deduction amount and the number of dependents you’re supporting.
Determining Your Disposable Income
Tips are typically not included in your disposable income, so this portion of your earnings is probably safe if you work in a job where tips are common. Disposable income covers salary, wages, bonuses, commissions and most sources of retirement income. You can subtract mandatory deductions for state and federal taxes, Social Security and unemployment insurance, but not union dues, insurance deductions or contributions to a retirement plan unless they're required by law. Your disposable income, which the garnishment is based on, is what's left after these deductions.
You can't be fired because your employer is unhappy about garnishing your wages, at least for the first garnishment order. Your job can be terminated if your earnings are garnished two or more times.
- Nolo: What Percentage of My Wages Can Creditors Take?
- U.S. Department of Labor: Fact Sheet #30 -- The Federal Wage Garnishment Law, Consumer Credit Protection Act’s Title 3 (CCPA)
- AllLaw: How Much of My Wages Can Be Garnished?
- Bankrate: How Wage Garnishment Works
- Legal Information Institute: 15 US Code Section 1673 -- Restriction on Garnishment
- Nolo: Wage Garnishments and Attachments