Imagine being an employer and receiving an order from the local sheriff’s department compelling you to garnish the wages of one of your employees. You have no choice but to comply. You dutifully start withholding a certain amount of the employee’s pay and forwarding it to the designated party.
What was just described is known as wage garnishment. If your income is ever subjected to a garnishment order, your take-home pay could be substantially less. How do you avoid wage garnishment? By paying your debts. It is as simple as that. Pay what you owe and there will never be in need to garnish your wages.
Wage Garnishment in Simple Terms
The simplest way to understand wage garnishment is to view it as a payroll deduction similar to tax withholding. In a wage garnishment scenario, your employer is compelled by a court order to withhold a certain amount of your pay. You really get no say in the matter unless state law affords you the opportunity to appeal against the order. But if you appeal and lose anyway, you are still out of luck.
State Laws Differ
Wage garnishment is usually handled at the state or local level. State laws differ in terms of:
- Legality – Most states allow garnishment of some sort. However, the practice is banned in a small number of states.
- Amount – Every state that allows garnishment limits the amount of income that can be taken. The federal limit is 25% of a garnishee’s disposable income. Some states have lower limits.
The idea of disposable income is key here. It is defined as income not needed to pay a garnishee’s living expenses. Using the 25% limit, a judgment creditor would first have to know how much the debtor makes and what their basic expenses are. Then a calculation of 25% would be made against the debtor’s remaining income.
If the debtor is already paying child support or alimony, the amount is included in their regular expenses. Likewise for outstanding tax payments.
Why Wages Are Garnished
Wage garnishment is a tool to compel uncooperative debtors to pay their bills. It is a tool often utilized by civil courts against divorced spouses who don’t keep up with child and spousal support arrangements. Wage garnishment is sometimes the only way to compel fathers and ex-husbands to comply with court orders.
Garnishment is also a tool utilized by judgment creditors following a successful lawsuit. Judgment Collectors, a specialist collection agency in California, Texas, and several other states, says garnishment is one of the first things collection agencies look at when a judgment debtor fails to make full payment or enters a payment plan.
Bank Accounts Can Be Garnished
Garnishment can be taken to the next level when bank accounts are involved. In many states, garnishing a bank account is very similar to garnishing wages. The debtor’s bank is served with an order requiring that it seize all or some of the debtor’s assets and forward them to the appropriate designee.
Once again, state laws differ in terms of the amount that can be garnished. The most important thing to note is that combining wage and bank account garnishment could give a judgment creditor a lot of leverage in the quest to get paid. Likewise, it could mean significant financial hardship on the debtor’s part.
Garnishment is not the preferred collection method following a successful court case. It often nets only small amounts and forces a creditor to continue collection efforts for too long a time. It’s also bad news for the debtor. So to avoid being subjected to garnishment, just pay your bills.