Wage garnishment explained: Causes, calculations, and ways to stop it

Even with the best of intentions, sometimes you just aren’t able to pay your bills as planned. Life gets in the way—it can happen to any of us. When your bills go overdue, a creditor could go to court and request assistance, resulting in wage garnishment. Here, we'll explain wage garnishment, how much can be garnished, and what you can do to stop the process. 

What is wage garnishment?

Wage garnishment is when a court orders an employer to withhold part of a person's salary to pay off a debt. 

When and why does wage garnishment happen?

Wage garnishment can occur for a variety of reasons. These are some of the most common:  

• Unpaid debts. When credit cards, medical bills, or personal loans go unpaid, and you haven’t resolved the debts, the lender may turn to the courts for help collecting the debt. Sometimes, the court's answer is to garnish wages. 

• Child support. When a parent stops paying child support or an ex-spouse misses alimony payments, the court may intervene by garnishing their wages.

• Student loans. When someone defaults on paying their student loan, the lender can ask the court to garnish wages.

• Unpaid taxes. The IRS can ask the court to garnish wages for those who fail to pay taxes. 

How wage garnishment works

Like many things, garnishment isn’t as scary when you understand how it works and how to deal with it. 

How much can creditors take?

You have some protection thanks to the Consumer Credit Protection Act, a law that protects consumers. The most that can be withheld from your paychecks is the lesser of two amounts:

• 25% of salary after state and federal income taxes are taken out

• 25% of the amount by which disposable earnings exceed 30 times the federal minimum wage

If that seems confusing, stick with us here as we explain how it works. 

In the first case—also known as disposable earnings—the court subtracts several specific deductions from the debtor's income. These include:

• Federal, state, and local taxes

• Employee's share of Social Security, Medicare, and state unemployment insurance tax

• Any required retirement contributions

Let's say your weekly income is $2,100, but after those legal deductions are subtracted, you're left with $1,700. 

1700 x 0.25 = 425

That means no more than $425 of your weekly income could be garnished. But first, the court makes a few more calculations. Here's how those calculations work: 

First, 30 times the federal minimum wage ($7.25) is $217.50.

The court subtracts that $217.50 from the disposable earnings:

1,700 - 217.50 = 1,482.50

Then, the court takes 25% of that amount:

1,482.50 x .25 - 370.63

In the first calculation, your wages would be garnished by $425 every week. In the second calculation, the amount is $370.63. Because the court chooses the lesser of the two amounts, your monthly garnishment is $370.63. 

Note: Garnishment amounts may vary by state, as some states have placed even stricter limits on the amount that can be garnished. If you're being garnished for child or spousal support, the amount of your earnings subject to garnishment will likely be higher. These are issues you'll want to discuss with an attorney. 

How long wage garnishment lasts

Wage garnishment continues until the debt is paid off or you take legal action to stop the garnishment. The length of the garnishment depends entirely on the amount of the initial debt. It could take years or it could be over in months.

Wages that can't be garnished

Some types of income are off-limits when it comes to garnishment. These include:

• Social Security and other government benefits or payments

• Child support or spousal support income

• Worker's compensation payments

• Most retirement funds

• Money received as a result of a personal injury lawsuit

Ways to stop or reduce wage garnishment

Fortunately, you have options. Here are a few ways to approach garnishment: 

Negotiate with your creditors

Creditors deal with issues like late payments and garnishment daily, so be bold about calling to negotiate with your creditors directly. While you may run into one that's unwilling to negotiate, most are open to speaking with you. These tips could help:

• Take a look at your financial situation. Before you call, figure out the total amount you owe on the debt, as well as how much you can afford to pay to clear it, either in a lump sum or monthly payments.

• Explain what’s going on. You might get more flexibility if you clearly and honestly explain why you're having trouble making payments. For example, if you’re dealing with unexpected medical bills or another financial hardship that might qualify for partial debt forgiveness, let the creditor know.

• Propose a solution. Based on your financial situation, offer a solution that could work for all parties. For example, if you have a lump sum of money but not the entire amount owed, offer to make a single payment for the amount you have available. Or, consider suggesting a realistic monthly payment plan based on how much you can pay. 

• Get everything in writing. Before making a payment, ask the creditor to provide the terms in writing. This will ensure you each have a clear understanding of the agreement. 

• Follow through. If an agreement is reached, stick with it until the debt is settled. Staying on track helps build trust. 

File a claim of exemption

It's possible you could file a claim of exemption. That’s a request to stop or reduce the garnishment based on your financial situation. 

For example, some states offer a head-of-household exemption for debtors with a dependent—like a child or elderly parent—who depends on their financial support. 

Consider legal options

There are several reasons to challenge garnishment, including:

• The amount garnished exceeds the legal amount allowed. The amount that can be garnished must be in line with federal and state limits. In addition, some states prevent certain types of creditors from garnishing you entirely.

• You're self-employed. Depending on state law, your earnings may not be subject to garnishment. 

• The creditor followed improper procedure. Creditors must follow a strict set of guidelines; if they fail, you have cause for challenge. 

• You've already paid or are currently paying the creditor. You can object to the garnishment if you're in the middle of a payment plan or have already paid the judgment. 

• You're being garnished by another creditor. In most cases, your wages can be garnished by only one creditor at a time. 

• You've filed for bankruptcy. Once you file for bankruptcy, an automatic stay prevents creditors from garnishing your wages. 

What to do if you can’t stop the wage garnishment

If, despite everything you do, you can’t stop the garnishment, it may be time to make some tough decisions. For example:

• Consider moving to reduce living expenses. Moving to a less expensive home might free up enough income to give you some breathing room.

• Sell stuff you don’t need. Many folks have a home full of items they don’t need or use. You may be surprised by how much money you could get by reselling your stuff. Think of all those things tucked away in your closets, basement, attic, or garage. Whether you have a garage sale or sell things online one at a time, every dollar helps. 

• Take on a part-time gig. For example, if you speak a foreign language or play an instrument, consider tutoring. If you make crafts or jewelry as a hobby, go pro by selling your work online. You may even find that picking up a part-time job near your home brings in enough money to get you through this time. 

• Look for other income streams. Consider passive income opportunities such as renting out a space or lending out items that others would pay to use. Even if these strategies generate just a few extra bucks, every dollar helps. 

Remember that wage garnishment doesn’t last forever. You’re simply looking for a way to ease your finances until the garnishment period passes. 

Professional help for dealing with wage garnishment

When dealing with wage garnishment, you’re not on your own. You can turn to several places for help. 

Related: Credit card debt: What to do if you can’t pay

Attorney

An attorney is a vital resource when your wages have been garnished. They could work with you to determine the best path forward and advise you on issues such as bankruptcy. A good attorney will also help you understand other options available to you. 

Credit counseling

An experienced credit counselor could negotiate with creditors on your behalf. The goal is to find a more affordable solution, like a reduced interest rate or extended repayment period. They may also work with you to set up a debt management plan (DMP). Under a DMP, you make a single payment to the counseling organization each month or pay period, and the organization makes monthly payments to your creditors. 

A couple of things to remember about a DMP: Credit counselors are permitted to charge a fee for the service, and a notation will be made to your credit report stating that you're repaying debt through the DMP. Also, your debts will not be reduced. The DMP is designed to fully repay your debts within three to five years. For some people, this makes the payment unaffordable.

Even if you decide not to enter a DMP, a credit counseling service could help you create a realistic budget you can live with, provide you with solid financial information, and help you reshape your finances. 

Professional debt resolution

Resolving debts means your creditor agrees to accept less than the full amount you owe and forgive the rest. If you’re not keen on the idea of negotiating directly with your creditors, you can work with a professional debt resolution company and let expert negotiators do the heavy lifting on your behalf. 

Read more: How Achieve Resolution works

Working with a debt resolution company can’t stop wage garnishment. But it could be a tool in your toolbelt as you work toward a more stable financial future. 

If you’re having trouble paying bills and worry that garnishment may be in your future, now is a good time to get a free debt evaluation and chat with a debt expert who can walk you through your options.