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When Your Wages Are Garnished

Your wages can be garnished for a number of reasons, and not all of them are in your control. Wages can be garnished for past debts you owe, for unpaid medical bills, or alimony or child support, or if you have an unsettled tax dispute with either your state or the federal government.

Last year, over 7% of workers across the country had their wages garnished. More than 40% of those were for child support; 20% were for back taxes; and the rest for outstanding consumer debt.

Wage garnishment is not a creditor’s first tactic—they’d much rather come to an agreement with the person who (they believe) owes them money.  In order to garnish wages, the creditor must first sue the debtor, and then get a court order.  There are some exceptions to this, however:

  • Unpaid income taxes
  • Court ordered child support (up to 60% of your disposable income can be garnished to pay child support, PLUS another 5% for payments that are more than 12 weeks late)
  • Past due child support
  • Defaulted student loans (up to 15% of your disposable income)

Federal law limits wage garnishment to no more than 25% of disposable income. Disposable income in this case means that amount of income left after deductions (tax withholdings, Social Security, etc.) are taken out of your paycheck.

State policies that apply in addition to federal law vary from state to state. In Hawaii, creditors can garnish:

  • 5% of your first $100 of disposable earnings per month
  • 10% of your second $100 of disposable earnings per month
  • 20% of your disposable earnings over $200 per month

Generally, across the states, Social Security, welfare, workers comp, and unemployment are exempt from garnishment. But check with the proper authorities to make sure it applies to you.

Employers are not happy about have to deal with wage garnishment orders–it’s extra work for them. They might want to fire you to avoid dealing with it, but luckily, federal law prohibits termination for one garnishment order.  Hawaii state law declares that employers cannot fire, suspend or discriminate against you because of wage garnishment.

What can you do?

The first thing you can do is to try to avoid getting in this situation in the first place. If you are falling behind on payments, contact your creditor and see if you can work out a payment plan.

Review your debts. How much are you paying in interest? Getting a loan with 5% to 10% interest makes more sense than paying down a credit card debt directly, if the credit card carries a 36% (or more) interest rate.

Did you receive a judgment? Now what?

Did you move? Unless you fall into one of the above categories, you should have received notice of the lawsuit, and then the notice of the court order. If you did not, perhaps the company used an old address.  You can use that as grounds to request cancellation of the garnishment. (But you’ll still have to come to an agreement to repay the debt.)

Review the judgment and make sure everything is correct. If it’s not all correct, your next step is to contact a lawyer. The National Association of Consumer Advocates has a directory of attorneys specializing in garnishment issues (as well as other issues).

Make sure that you are not being garnished more than allowed by federal or state law (see above, and consult an attorney), and see if you can challenge the judgment.

As mentioned above, think about getting a low-interest loan. Calculate the math, and make sure it works for you and your income situation.

Last resort: Declare bankruptcy. There are certain specific debts that can’t be discharged through bankruptcy, but you can eliminate most consumer and medical debt. Talk to a bankruptcy attorney to review your situation and your options (the first visit should be free).  The National Association of Consumer Bankruptcy Attorneys will help you look for a lawyer in your area.

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