Understanding wage garnishment

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Wage garnishment has been a growing issue in the United States for many years now. ADP—the nation’s largest payroll services provider—published a report in 2017 that found one in 14 American workers is carrying a wage garnishment.

Of those individuals, 12 percent are carrying more than one. Gen X (individuals between the ages of 35 and 54) have the highest rate of wage garnishments—a shocking 10.2 percent of this age group is holding one or more wage garnishments.  

Unfortunately, the COVID-19 pandemic has only created more financial hardships for those who were already struggling. It’s crucial that those impacted by wage garnishment—or who think they’re about to be—understand their rights and options. 

What is wage garnishment?

Wage garnishment is a type of forced debt collection. If a wage garnishment is in effect, your employer has to set aside a specific amount of your paycheck. That money is then sent to your creditor (or whoever you owe) to reduce the amount of debt you owe them. The wage garnishment will continue until the debt is paid off. 

A wage garnishment is typically administered through the court system. A creditor can sue a consumer for not paying their debts. If they don’t respond to the lawsuit, a default judgment occurs and they immediately go into wage garnishment. 

If this applies to you, know that you can fight the garnishment. But if you lose, a judgment is set against you, after which your employer is notified of the judgment and instructed to withhold some of your income (note that your employer is legally obligated to comply with the judgment instructions). 

Wage garnishment applies to your personal earnings. An individual’s personal earnings can include salaries, wages, bonuses, commissions, income from a pension and retirement income. Tips are usually excluded from personal earnings and therefore don’t fall under the umbrella for wage garnishment. 

Some common reasons for wage garnishment include companies suing consumers for nonpayment on consumer debt, banks suing for foreclosures and insurance or health providers suing for medical bills. 

Certain types of creditors don’t have to go through the court system to approve a wage garnishment. This applies to outstanding taxes, child support, alimony and federal student loans. 

Wage garnishment vs. nonwage garnishment

A different type of forced debt collection is nonwage garnishment. With a nonwage garnishment (also known as bank levy), the creditor gets direct access to your bank account. A nonwage garnishment is typically reserved for freelancers or individuals who are self-employed. This is because self-employed individuals often don’t qualify for a standard wage garnishment. 

Another important distinction is that a nonwage garnishment typically only happens once versus recurring payments in wage garnishment. 

Lastly, a nonwage garnishment has no limitations on the amount taken. As a result, 100 percent of the funds in your account can be taken. In comparison, wage garnishments come with set limits. 

How to calculate wage garnishment

Under federal law, your wages can only be garnished up to 25 percent of your net earnings per week or the amount by which your take-home pay exceeds 30 times the federal minimum wage (currently $7.25 per hour)—whichever is less. Some states have implemented a lower maximum percentage. 

Ultimately, how much of your wages will be garnished depends on the type of debt and the state it’s in. 

Many states have vastly different rules when it comes to wage garnishment, so individuals should look into their state wage garnishment laws when trying to estimate their payments. For example, New York typically only allows for 10 percent of gross wages to be taken. In comparison, Massachusetts will allow up to 15 percent, and California will allow up to 25 percent. 

Alimony and child support

When it comes to unpaid child support, up to 50 percent of disposable earnings can be garnished if you’re supporting an additional child or spouse. Individuals who aren’t supporting an additional child or spouse can be garnished for up to 60 percent. Lastly, an additional 5 percent can be taken if you’re more than 12 weeks in default on payments. 


The IRS limits how much it will garnish for unpaid taxes. When making its decision, the agency considers factors like children or spouses you support. The IRS doesn’t need to take you to court to garnish your wages. 

State taxing authorities also have limits for wage garnishments set at the state level. 

Student loans

The U.S. Department of Education can garnish up to 15 percent of disposable income for defaulted student loans. Like child support and taxes, this type of wage garnishment doesn’t have to go through the court process. However, individuals will receive a 30-day notice before wage garnishment begins, a detailed account of how much they owe and information on how to pursue a court hearing for the wage garnishment. 

Other consumer debt

For your wages to be garnished over consumer debt, the creditor will need to sue you. If the lawsuit is successful and a judgment is passed, your wages will likely be garnished at the federal or state maximum. 

Your rights in a wage garnishment

It’s crucial to understand your rights related to wage garnishment. Under the federal wage garnishment law, Consumer Credit Protection Act’s Title III (CCPA), an employer can’t fire someone because their work wages are garnished. However, consumers are only protected against one garnishment. There’s no protection for individuals who have more than one wage garnishment against them. 

Legally, individuals must always be notified of a wage garnishment, including when it will start, what it’s for and how much is owed. 

Only certain types of income can be garnished. As we’ve previously mentioned, wage garnishments are not allowed for freelancers or the self-employed. Instead, self-employment income can be subject to nonwage garnishment. 

Other income exceptions include disability benefits, veteran benefits and Social Security benefits. Your bank can identify and protect these benefits because these are all federal benefits and federal funds are automatically tagged when deposited into bank accounts. 

How to stop a wage garnishment

If a wage garnishment is wrong or violating your rights in some way, you can choose to dispute it. 

Challenge it

If you feel that some aspect of your wage garnishment is incorrect, you can dispute it. You’ll be granted a hearing where you can make your case. Some of the reasons you may challenge a wage garnishment are:

Negotiate with creditors 

If you haven’t gone to court yet and had a judgment filed against you, it’s not too late to negotiate with your creditors! You’ll likely have to deal with the creditor’s lawyers, but you can propose a payment plan. Figure out how much you can afford to pay per month and offer to do so without a wage garnishment.

If you have some extra cash available, you might want to consider offering an up-front lump-sum payment to make the offer more appealing. A creditor may be willing to work with you as they can avoid court and save on legal fees. 

Declare bankruptcy

If you file bankruptcy, it can stop collections on most debts, including potentially wage garnishments. However, bankruptcy should always be a last resort. Bankruptcy doesn’t stop all wage garnishments. If you file a Chapter 7 bankruptcy and owe child support or alimony, you’ll still have to continue payments. Bankruptcy will also have other consequences on your financial health that can impact you for many years to come. 

Does wage garnishment hurt your credit score?

Indirectly, yes, because the things that led up to your garnishment will affect your credit. To get to the point of a wage garnishment, you had to default on your payments. Missing several payments and having collection accounts on your credit reports can significantly lower your credit score. 

Previously, having a civil judgment on your public record would have also negatively impacted your credit score. However, the National Consumer Assistance Plan was put into effect in 2017 and changed which public records could go on credit reports. Tax liens and civil judgments, such as wage garnishments, no longer fit the new requirements and should not appear on your reports. 

How to remove a wage garnishment from your credit report

If your wage garnishment—as a civil judgment—is still on your credit report, you should immediately file a dispute to have it removed. You’ll need to contact each of the three major credit bureaus and request the judgment be removed. Unfortunately, this won’t erase the damage the many months (or years) of missed payments and collections have done to your credit score.

To fix that, you can turn to professional help. focuses on helping clients with their credit scores. We can access your credit reports, review them for mistakes and file disputes on your behalf. Even catching one error on your credit report can potentially increase your credit score by several points. Let do all the work for you so you can get back to a strong financial future. 

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