What Is Wage Garnishment?

Financial security is important at every age and career stage. Yet in some specific cases, you may find this security jeopardized through a process known as wage garnishment, which allows your company to withhold your paycheck.

What Is Wage Garnishment?

According to the U.S. Department of Labor, wage garnishment is “a legal procedure in which a person’s earnings are required by court order to be withheld by an employer for the payment of a debt, such as child support.” It’s important to understand why your wages might be garnished, how employers calculate wage garnishment and how to stop wage garnishment.

Why Might Your Wages Be Garnished?

According to a November 2020 report from the National Consumer Law Center, nearly 3% of the workforce — or more than 4.5 million workers — had their paychecks garnished for consumer debt.

There are a number of different reasons in which wage garnishment can occur legally. These include defaulted student loans or car loans, debt owed to a credit card company, failure to pay child support or alimony or unpaid taxes.

That list is not comprehensive; when it comes to determining which type of debts may be eligible for wage garnishment, just about anything is eligible since a debt is a debt.

[Read: What Happens to Your 401(k) When You Leave Your Job.]

How Is Wage Garnishment Calculated?

Exactly how much money can be garnished from your paycheck? Title III of the Consumer Credit Protection Act specifies a maximum dollar figure that an employer can garnish from an employee’s paycheck in a given pay period or workweek. This limitation is set no matter how many garnishment orders the employer has received.

The Wage and Hour Division of the DOL specifies that for ordinary garnishments — or “those not for support, bankruptcy, or any state or federal tax” — the weekly amount to be garnished from your paycheck can’t exceed the lesser of two figures:

— One-fourth of your disposable earnings, which is how much is left in your paycheck once legal deductions such as taxes and Social Security have been made.

— The amount by which your disposable earnings are greater than 30 times the federal minimum wage.

DOL offers the following example on its website:

Say you have a weekly pay period and your disposable earnings are $217.50 or less. If $7.25 is the federal minimum wage, the employer cannot legally garnish your wages in this case. But if your disposable earnings are greater than $217.50 but less than $290 (which is the minimum wage times 40, in this case), then your employer can garnish $72.50. And if your disposable earnings total $290 or more, then the maximum amount that the employer can garnish is 25% of that.

DOL also notes that if your pay periods cover more than a single week, your employer must use multiples of the weekly restrictions to determine the highest amount they can garnish. You can see a table that calculates sample amounts or use this free online wage garnishment calculator for reference.

[See: 25 Best Jobs That Pay $100K.]

How Exactly Is Garnishment Paid?

The legal resources website Nolo states: “Wage garnishments are usually continuous, being withdrawn from each paycheck until paid.”

According to the personal finance website Nerd Wallet, there are different ways that you can pay off a wage garnishment. These include:

— Installment payments.

— Lump sum payment.

— Using a personal loan.

— Borrowing from a family member or friend.

If you don’t have enough for a lump sum payment and decide to go either of the latter two routes — a loan or borrowing from a contact — you may be able to borrow enough to pay off the garnishment in full. This can help you avoid a drawn-out process of installment payments. But if you can’t pay the garnishment in one blow, then accepting responsibility for a series of installments is a good second choice.

You can also try to talk to the creditors in question and discuss options for the type of payment plan that works best for you. As a consumer, this is a perfectly valid approach and one that many creditors will be willing to work with to help you determine how best to meet your financial obligation.

According to Nolo, freelancers and independent contractors don’t need to worry about their wages being garnished. But self-employed workers do have another concern: a creditor can use what’s known as a nonearnings garnishment to take some of their income. Nolo describes nonearnings garnishment as “a one-time attachment of compensation received for services rendered, such as commissions, receivables from a particular source, or a contract payment.”

And unlike with traditional employees who can only have 25% of their disposable income garnished by an employer, self-employed people can have up to 100% of their expected compensation garnished, Nolo reports.

[Read: Best Gig Economy Jobs.]

How to Stop or Challenge Wage Garnishment

Title III, which provides protection for every individual who receives personal earnings, provides some legal protection to workers regarding wage garnishment. It will, in most cases, “give individuals the right to receive at least partial compensation for the personal services that they provide despite garnishment,” according to the DOL. Title III additionally prevents employers from firing staff members due to wage garnishment for any one debt, but it doesn’t protect employees once their earnings have been garnished for subsequent debts.

While you may want to talk to your employer about the situation, the best thing to do if you feel that your wages are being garnished illegally is go directly to the source with decision-making power where wage garnishment is concerned. Submit a complaint to the Wage and Hour Division, which has final authority when questions arise over the amount of money garnished from an employee’s paycheck, as well as over termination. There are resources and additional information to help employees file a complaint related to wage garnishment.

You can also try to stop or challenge wage garnishment by speaking with a lawyer. “Usually, you have the right to written notice and a hearing before your employer starts holding back some of your wages to pay your judgment creditor,” according to Nolo. However, time is limited — anywhere from five days to a month — to raise your objections before wage garnishments begin.

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What Is Wage Garnishment? originally appeared on usnews.com

Update 08/16/21: This story was published at an earlier date and has been updated with new information.

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