Garnishment

Definition

Garnishment is a legal mechanism of withholding a portion or all of an employee’s wages under a court directive. This withheld amount is then sent directly to the court or to a creditor who has won a lawsuit against the employee. Essentially, it’s a method used to enforce financial obligations such as debt repayments, child support, or alimony awarded by a court.

Examples

Debt Repayment: John owes a substantial debt to Credit Corp. After multiple failed attempts to collect the debt, Credit Corp secures a court order for garnishment. John’s employer is then legally obliged to withhold a portion of John’s wages each pay period and send it directly to Credit Corp until the debt is cleared.
Child Support: Lisa’s ex-husband has not been consistent with child support payments as ordered by the court. Lisa obtains a garnishment order to ensure that the owed child support will be automatically deducted from her ex-husband’s salary each month and sent directly to her.
Unpaid Taxes: The IRS garnishes Peter’s wages because he has not paid his federal income taxes. Part of Peter’s paycheck is automatically transferred to the IRS until the tax arrears are settled.

Frequently Asked Questions (FAQs)

What types of debts can result in wage garnishment?

Wage garnishment can result from various types of debts including credit card debts, medical bills, child support, alimony, unpaid taxes, and personal loans.

Who initiates the garnishment process?

The garnishment process is typically initiated by creditors, government agencies, or an individual owed monetary support (e.g., child support, alimony). This is done by filing for a court order.

How much of my wages can be garnished?

Federal law limits the amount of wages that can be garnished. Generally, up to 25% of disposable earnings may be garnished, or the amount by which weekly wages exceed 30 times the federal minimum wage, whichever is lower.

What is “disposable income” when it comes to garnishment?

Disposable income is the amount of an employee’s earnings left after legally mandated deductions (e.g., taxes, Social Security) but not deductions for things like health insurance or retirement plans.

Can I prevent my wages from being garnished?

In some circumstances, you may prevent garnishment by negotiating directly with the creditor or seeking assistance from a debt counselor. Additionally, some forms of income like social security benefits and disability payments may be exempt from garnishment.

Can more than one garnishment be taken from my wages?

Multiple garnishments can be taken from your wages, but there are legal limits to the total amount that can be taken. Federal and state laws often set these limits to protect an individual’s livelihood.

Levy: Seizure of property to satisfy a debt, often used by the IRS to collect unpaid taxes.
Judgment: A court decision outlining the outcome of a legal dispute, which may include repayment requirements.
Disposable Income: Earnings remaining after deductions for taxes and mandatory items.
Debt Settlement: An agreement between a debtor and creditor to reduce the amount owed and arranged for repayment.

Online References

Suggested Books for Further Studies

“Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights” by Gerri Detweiler and Mary Reed
“The Law of Garnishment” by Jacob Rabkin and Mark H. Johnson
“Credit Repair Kit” by Jeffery D. Cowan

Fundamentals of Garnishment: Business Law Basics Quiz

### What is garnishment? - [x] A court order to deduct part of an employee's wages to pay off a debt. - [ ] A method to calculate income taxes. - [ ] A legal term for bankruptcy proceedings. - [ ] A voluntary wage donation program. > **Explanation:** Garnishment is a court order requiring an employer to withhold a portion of an employee's wages to satisfy a debt owed to a creditor. ### What could lead to wage garnishment? - [ ] Parking violations - [x] Unpaid debts - [ ] Poor job performance - [ ] Overdue library books > **Explanation:** Wage garnishment typically results from unpaid debts such as credit card debts, loans, or child support. ### Who issues a garnishment order? - [ ] The employer - [ ] The employee - [x] The court - [ ] A financial advisor > **Explanation:** Garnishment orders are issued by the court upon a creditor's request. ### Can employers refuse to comply with a garnishment order? - [ ] Yes, if the employee asks them to. - [ ] Yes, if the debt is less than $500. - [x] No, employers must comply with the court order. - [ ] Employers can choose what percentage to withhold. > **Explanation:** Employers are legally required to comply with garnishment orders issued by the court. ### Which type of income is generally protected from garnishment? - [ ] Weekly bonuses - [ ] Overtime pay - [x] Social Security benefits - [ ] Year-end bonuses > **Explanation:** Social Security benefits are generally protected and exempt from garnishment. ### What is the maximum percentage of disposable earnings that can typically be garnished? - [x] 25% - [ ] 50% - [ ] 10% - [ ] 100% > **Explanation:** Up to 25% of an individual's disposable earnings can be garnished according to federal law. ### What is disposable income? - [ ] Gross income before taxes. - [ ] The amount left after paying all monthly expenses. - [x] Earnings after deducting taxes and legally mandated deductions. - [ ] Net income after voluntary contributions. > **Explanation:** Disposable income is the amount of earnings left after deducting taxes and other legally mandated deductions. ### Can you stop wage garnishment by declaring bankruptcy? - [x] Yes, filing for bankruptcy may halt garnishment. - [ ] No, garnishment continues regardless of bankruptcy. - [ ] Only federal debts are stopped. - [ ] Bankruptcy does not affect wage garnishment. > **Explanation:** Declaring bankruptcy can temporarily halt garnishment, depending on the types of debts involved. ### Can more than one creditor garnish your wages at the same time? - [ ] No, only one garnishment is permitted at any time. - [x] Yes, but there are limits to the total garnished amount. - [ ] Only if a federal debt is involved. - [ ] Garnishments must be processed sequentially. > **Explanation:** Multiple garnishments can occur, but there are statutory limits on the total amount that can be garnished from one's wages. ### How can an employee challenge a garnishment order? - [x] By filing a claim of exemption or objection with the court. - [ ] By refusing to show up to work. - [ ] By asking their employer not to comply. - [ ] By withholding their own wages. > **Explanation:** An employee can challenge a garnishment order by filing a claim of exemption or objection with the court that issued the garnishment.

Thank you for exploring the concept of garnishment, and diving into these quiz questions designed to solidify your understanding of business law basics concerning wage garnishment!