Rules for Wage Garnishment

Garnishment is a legal proceeding, wherein the court allows or orders the confiscation of a debtor's personal property to pay for his or her liabilities. When this confiscation is in the form of deductions from the wages of the defaulter, the process is called wage garnishment.

Before any earnings are garnished, the debtor is served a notice by the creditor to pay off the debt. In case the debtor agrees to the proposal, the process of wage garnishment can be avoided altogether. If the employee doesn't respond to the notice, the creditor will initiate the process of wage garnishment by filing a Request for Garnishment of Wages.

A court order will be served to the employer of the debtor, who has to assume the responsibility of 'garnishee' in this process. The court order is usually sent through a Sheriff.

It is important to remember that an employer can't garnish the employee's wage without providing him the following papers:

1. Order and Notice of Garnishment and Answer of employer.
2. Notice to Judgment Debtor.
3. Request for Hearing form.

If an employee feels he is being charged unfairly, he has the option to request for a hearing in the court.

The amount of earnings that are to be garnished are governed by certain rules as per the Title III of the Consumer Credit Protection Act. According to the Act, an employer cannot terminate an employee on the grounds of wage garnishment for a single debt.

However, if the employee's earnings are garnished for a second or subsequent debts, the employer has the authority to take necessary action against the employee. The amount of earnings that can be garnished are subject to the "disposable earnings" of the debtor.

Disposable earning is the amount that is left after the legal deductions which include:

• Income taxes, federal/state
• Contribution to State Unemployment Insurance
• Social Security

Deductions that are not exempted from wage garnishment include:

• Voluntary wage assignments
• Union dues
• Health and life insurance
• Contributions to charitable causes
• Saving bonds

The Title III of the Consumer Credit Protection Act protects the consumer by ensuring the creditors garnish only 25% of the disposable income of the debtor. It also protects debtors by ensuring that no wages are garnished if the debtor's gross income is less than or equal to 30 times the minimum hourly wages as defined by the Federal or state laws.

Let us take an example to illustrate the wage garnishment rules. Suppose, Jim and Luke are facing wage garnishment.

Jim:
Hourly wage = $7.25
Gross Weekly Wage = $290 ($.7.25 x 40)
Disposable Weekly Wage = $260 (after taxes)
Wage garnishment as per 25% rule = $65 (25% of $260)

If $65 are deducted from Jim's disposable income, he would be left with $195 ($260-$65)

Minimum hourly wage is $7.25
Minimum weekly wage = $217.50 ($7.25 x 30)

If Jim's wages are deducted at 25%, his earnings will drop below the minimum weekly wages, therefore the 25% rule will not be applicable in Jim's case.

The amount that can be garnished from Jim's disposable income is $42.50 ($260 - $217.50)

Luke
Hourly wage = $10
Gross Weekly Wage = $400 ($10 x 40)
Disposable Weekly Wage = $360 (after taxes)
Wage garnishment as per 25% rule = $90 (25% of $360)

If $90 are deducted from Luke's disposable income, he will be left with $270 ($360-$90).

Minimum hourly is $7.25
Minimum weekly wage = $217.50 ($7.25 x 30)

If Luke's wages are deducted at 25%, his earnings will still be above the minimum weekly wage, therefore, the 25% rule is applicable in Luke's case.

The amount that can be garnished from Luke's disposable income is $90.

Therefore, if an individual's disposable income is $217.50 or less, his wages can't be garnished. However, this rule is not applicable on the following:

• Child/Spousal support garnishments.
• Chapter 13 bankruptcy debtors.
• State/Federal tax debts.

The limits on wage garnishment are not applicable on certain debts. In case of debt on child or spousal support, the penalties are higher. In such scenarios, the employer of the debtor can be ordered to garnish 50% to 65% (depending upon clauses) of the employee's disposable income, irrespective of whether it is lower than minimum weekly wage.

There can be a case where more than one creditor has got a lawsuit to garnish the disposable income of the debtor. In such scenarios, there is a hierarchy in place which prioritizes the debts. Debts owed to child/spousal care get the most importance and are to be paid off first.

If the garnishment on child/spousal support exceeds the limits set up the laws, no further garnishment will take place. In such cases, the second garnishment will start only when the first one comes to an end.

The set of guidelines ensuring a proper deal with the wage garnishment proceedings include the following points:

◘  If an employee quits the job, the concerned employer is no longer liable to furnish the garnishment amount.

◘ The special allotments of an employee such as the social security benefits, workers' compensation, retirement benefits, insurance or health and accident benefits and unemployment insurance cover, do not come under garnishing deductions.

◘ Any action on the employees, on account of their garnishment liabilities is illegal and may initiate action against the employer by the concerned authority.

◘ The provisions of the law must be properly assessed by all the concerned parties, with respect to employee rights, compliance issues, associated penalties or sanctions and the knowledge of local, state and federal law. Before any action by any party, one must ensure adherence of its rules and procedures, and hence avoid unnecessary trouble.

Source : United States Department of Labor

(Please note that the exceptions to the wage garnishment may vary from state to state. It is advisable to consult an attorney or a trustee to help you with the process of wage garnishment).