Garnishment: What It Is, What You Can Do About It

Paying Off Debt, Personal Finance
Garnishment: What It Is, What You Can Do About It

Garnishment lets debt collectors take payment directly from your paycheck or bank account.

The road to garnishment is long, and it’s likely the last option for a debt collector that has tried to retrieve payment on a bill for months. By the time a debt results in garnishment, your credit standing has dropped. Now your budget will take a hit.

But you have legal rights, including caps on how much can be taken at once. And you can take steps to lessen the effect and help you bounce back.

What it is

There are two types of garnishment:

  • In wage garnishment, creditors can legally require your employer to hand over part of your earnings in order to pay off your debts.
  • In nonwage garnishment, commonly referred to as a bank levy, creditors can tap into your bank account.

Wage garnishment is more common than you might think. A report by ADP Research Institute found that 7.2% of the 13 million employees it assessed had wages garnished in 2013. For workers ages 35 to 44, the number hit 10.5%. The top reasons were child support; consumer debts and student loans; and tax liens.

Here’s an overview of the federal limits on how much of your disposable income a creditor can take. (When it comes to wage garnishment, “disposable income” means anything left after the necessary deductions such as taxes and Social Security.)

Type of debtPercent of weekly disposable income that can be taken
Credit card and medical bills, personal loans and most other consumer debtsEither 25% or the amount by which your weekly income exceeds 30 times the federal minimum wage (currently $7.25 an hour) — whichever is less.

Here’s how that breaks down:
• If your weekly disposable income is $290 or more, 25% is taken.

• If between $289 and $217.51, the amount above $217.51 can be taken.

• If $217.50 or lower, garnishment is not allowed.
Child support and alimony50% if you are supporting another child or spouse; otherwise, up to 60%.

If you are more than 12 weeks late in payments, an additional 5% may be taken.
Federal student loans15%
TaxesGenerally, up to 15%. The Internal Revenue Service will determine the amount taken based on standard deductions and the number of dependents you have.

Note: State laws around garnishment vary greatly. Your state may have additional protections that shelter more of your income or bank account balance, or it may offer exemptions for things like being head of household with dependent children. In most cases, debtors must find out about exemptions and ask for them on their own. Nonwage garnishment, which is less common, is generally less regulated and has fewer restrictions for creditors.

How it happens

Garnishment often happens by state court order after a creditor sues you for nonpayment of a bill and wins. Sometimes, though, a creditor can force garnishment without a court order, for instance if you owe child support, back taxes or a balance on federal student loans.

The process can take months, but it’s pretty simple.

First, you incur some form of debt. Your bill goes unpaid for several months — 180 days is a common cutoff — and becomes delinquent. At this point, the creditor may sell the debt to a third-party debt collector. The owner of the debt tries to retrieve payment and, if unsuccessful, sues. You’ll get a notice of the court hearing. You may want to get legal advice to determine how to proceed. This hearing is your chance to say whether you don’t owe the debt, it’s past the statute of limitations or you want to strike a deal.

If you don’t show up in court or you do appear but lose your case, the creditor wins a judgment against you to garnish your wages or bank account. The court will send notices to you and your bank or employer, and the garnishment will begin in five to 30 business days, depending on your creditor and state. The garnishment continues until the debt, potentially including court fees and interest, is paid.

Your rights

You have some rights in the wage garnishment process, but take note: In most states, it is your responsibility to be aware of and exercise these rights.

  • You have to be legally notified of the garnishment.
  • You can file a dispute if the notice has inaccurate information or you believe you don’t owe the debt.
  • Some forms of income, such as Social Security and veterans benefits, are exempt from garnishment as income. However, they could be subject to seizure once in your bank account.
  • You can’t be fired for having one wage garnishment, but you’ll lose this protection if you incur more than one garnishment.

If you believe the judgment was made in error or it’s causing undue harm to your finances, you can challenge the garnishment.

How to proceed when you get a garnishment judgment

First, carefully read the judgment to verify that all of the information is accurate. Make sure that it’s not something you already paid and that it’s debt you actually took out. If it is, consider how much money will be taken and what it will mean for your financial situation.

Then weigh what to do next. If you haven’t done so before, you may want to consult a consumer law attorney or local legal aid to determine what’s best for you. You have three main options:

  • Work out a different deal: Pick up the phone and try to work out an alternative payment plan with your creditors. “A lot of consumers underestimate the power of a conversation,” says Tara Alderete, director of education at Clearpoint Credit Counseling Solutions. “Look at a budget, see how much you owe, what you can pay, and then just call the creditor to see if you can work out a payment plan. Creditors and consumers always have that ability.”
  • Challenge the judgment: If you believe the garnishment was made in error, will cause undue harm or is being improperly executed, you can always object to the judgment in court. You can take measures to challenge the judgment on your own, but you’ll have to act quickly. You may have as few as five business days to contest the ruling.
  • Accept the garnishment: You can pay off the garnishment in installments as the judgment states or pay in a lump sum. Borrowing money from a family member or taking out an affordable personal loan to pay off the judgment, possible even with it on your credit report, could give you a quick out from the stress of a prolonged series of payments.

It can be embarrassing to have your employer know you’ve been sued for debt. To counter this, talk with your manager or head of human relations to be transparent about your situation. “Wage garnishment can cause stress in the work environment, so be proactive in talking with your employer,” Alderete says. “Have a conversation where you say what’s happening and that you don’t want it to become a problem.”

Next steps

If you don’t see a path forward from wage garnishment, consult the free services of a nonprofit credit counselor to discuss your debt relief options, such as a repayment plan or bankruptcy.

A garnishment judgment will stay on your credit reports for up to seven years, affecting your credit score. But there a few easy ways to improve your score, both during and after wage garnishment.

Building a budget — and sticking to it — can help you stay on top of your finances in order to avoid unpaid debts that might lead to another garnishment. From there, you can take out products such as a secured credit card to work on rebuilding your credit.

Sean Pyles is a staff writer at NerdWallet, a personal finance website. Email: spyles@nerdwallet.com.