Wage Garnishment

If there is a debt that is owed to the Internal Revenue Service for unpaid taxes, unpaid child support, student loans that are in default, or fines, then a wage garnishment can be implemented. A wage garnishment gives legal authority to a third party, such as an employer, to deduct amounts from paychecks to satisfy the outstanding debt until the entire debt is satisfied.

There are limits to the wage garnishment amounts taken out of a paycheck created and enforced by the Consumer Credit Protection Act. The amount cannot exceed 25% of weekly disposable income if that income is greater than $290.00. Income is deemed disposable after-tax deductions have been made to gross income. If less than $217.50, then wage garnishments cannot be implemented. Limits have been set by the Consumer Credit Protection Act allowing special considerations such as those with minor child responsibilities or financial hardship. If shown that wage garnishment will create a financial hardship, you may be eligible to file a claim to reduce the wage garnishment. Employers cannot terminate an employee to avoid garnishing their wages.

Title III of the Consumer Credit Protection Act protects employees from discharge for wage garnishment from a single debt and limits the amount garnished in any one week payroll. However, it does not protect employees from discharge for a second garnishment or subsequent garnishments. Title III allows application of garnishments from all wages earned, commissions, bonuses, salaries, and retirement and pension distributions. Title III also allows up to 60% wage garnishment if support of another or others is delinquent. It is not required for the IRS to obtain a court order to garnish wages as they have full power and authority to implement wage garnishments for unpaid taxes. However, all other debts requiring collection, such as delinquent child support payments, past due fines, defaulted student loans, must obtain a court order before wage garnishment can be implemented.

There is a hierarchy for wage garnishments. Any debt owed to the Federal Government, such as delinquent taxes, ranks the highest and prioritizes other wage garnishment demands. Child support ranks second to Federal financial obligations and ranks above all other creditors, such as medical payment obligations, credit cards, personal loans, and other unpaid financial obligations. Other than overdue Federal and child support financial obligations, other creditors are then ranked by date of the debt. The earliest debts will be garnished first. Work garnishments can affect credit scoring and stay on your credit history for seven years. Usually, if bankruptcy is declared, it can stop wage garnishments. Consult a tax attorney at Morehouse Law for guidance on stopping garnishments and bankruptcy options.

Violations by employers to Title III of the Consumer Credit Protection Act will be dealt with strictly. Some of the violations can include but are not limited to, improper discharge or firing of an employee resulting in reinstatement, improper dollar amount deducted from payroll which will result in returning any overages, back pay to the employee or complete return of garnished amounts. If the employer has been responsible for wrongful termination thereby being in violation of the law, specifically Title III, then the employer may face criminal charges and prosecution, fined or imprisoned.

Employees do have rights when it comes to wage garnishments There are a couple of monies that are off-limits to garnishment and those are Social Security and Veterans benefits. A notification or judgment will always precede the wage garnishment which is a legal notification. This notification will not come from the employer but rather from the creditor, itself. If you notice any inaccuracies in the judgment or the owed debt is false, then filing a dispute before the wage garnishment begins, is an option. Once the judgment is in place and it’s causing proven undue financial harm, then filing a dispute or challenging the judgment still remains an option by acting quickly within a five-day period. Upon receiving notification, do some math and determine what is feasible for your budget. It may be worthwhile to call a reputable attorney who can help navigate through the judgments before garnishments take effect. It may be an option to pay the creditor direct in full, or work out payment terms. A Morehouse Law tax attorney, working on your behalf, will engage in negotiations to get the best outcome. The employer should fully cooperate in providing a copy of the demand notification they received to begin garnishments.