What is wage garnishment? How much of your salary can be garnished?

If you have not been paying off your loans or other financial obligations in a timely manner, your creditors have a legal recourse to collect the money that you owe them, and it can affect your take-home pay.

What Is wage garnishment?

Wage garnishment is a legal process in which a portion of a person’s earnings is withheld by their employer and sent to a creditor in order to satisfy a debt.

This usually takes place when a person has failed to meet their financial obligations, such as paying off a loan, taxes, credit card debt, or child support. Wage garnishment is often used as a last resort by creditors, courts, or government agencies to get the money they are owed.

READ ALSO: Tips to get approved for a student loan quickly

How much of your salary can be garnished?

The amount of your salary that can be garnished depends on various factors, including federal and state laws, as well as the type of debt. Also, only your disposable income can be used for this purpose. Disposable earnings are defined as your income after mandatory deductions like taxes and social security payments.

Here are some important points to consider:

Federal limit

Under federal law, the Consumer Credit Protection Act sets limits on the amount that can be garnished from your wages. In most cases, creditors cannot garnish more than 25% of your disposable earnings or the amount by which your disposable earnings exceed 30 times the federal minimum wage, whichever is less.

READ ALSO: Why is childcare so expensive in the United States?

State laws

States also have their own laws regarding wage garnishment, and they can vary widely. Some states may have lower limits on the percentage of income that can be garnished or additional protections for debtors. You should check your state’s specific regulations to understand how they apply in your situation.

Type of debt

Different types of debts may have different rules and limits for wage garnishment. For example, federal law allows garnishment of up to 50% of disposable income for child support and spousal support payments. For student loans, federal law allows up to 15% of disposable earnings to be garnished.

READ ALSO: How college tuition insurance works

Multiple garnishments

If you have multiple creditors seeking wage garnishment, the total amount garnished cannot exceed the federal or state limits, whichever is lower. The worker must still be able to live off what is left of the salary.

Exemptions

Some types of income may be exempt from garnishment, such as certain federal benefits like Social Security, Supplemental Security Income, and veterans’ benefits. However, exceptions and rules vary by jurisdiction.

You have the right to be notified before your wages are garnished, and you may have the opportunity to dispute the debt or negotiate a repayment plan with your creditor.

It is still best to avoid wage garnishment so that your regular salary won’t be reduced and your credit score won’t be further affected. You can do this by paying bills on time and reducing your loan balances.