Garnishment

What is Garnishment?

Garnishment, also known as wage garnishment, is when money is withheld legally from the paycheque and sent to another party. It is referred to a legal process that asks a third party to deduct payments from the Bank account or wage of a debtor directly.

Generally, the third party is the employer of the debtor and is known as the garnishee. Federal law prevents employers from firing any employee to avert the garnishment payment processing. Typically, garnishments can be used for a variety of debts, like defaulted student loans, child support, monetary fines, and unpaid Taxes.

How Does it Work?

For the wage of a debtor to be garnished, credit has to acquire order from a court, given that the debtor is owing money and has defaulted payments. If the debt has been levied by the Internal Revenue Service (IRS), the court order will not be necessary.

Thus, the IRS will direct the debtor to remit a part of his salary for a specific time period under his tax obligations have been paid completely. Considering that garnishments are the last resort to acquire debts and show the unfavourable repayment history of a person, they can also leave a negative impact on the credit rating of the debtor.

The Concept of Wage Garnishment

The Consumer Credit Protection Act has stipulated the Income amount that can be garnished from the way of a person. Basically, this amount is lesser than the:

• 25% of weekly disposable income in case the person’s disposable income is more than $290
• Any amount more than 30 times the weekly minimum amount of wage, which is $217.25

People who earn weekly minimum amount as the disposable income every week wouldn’t receive any sort of wage garnishment. However, those who earn a disposable income anywhere between $217.50 and $290 every week can get the amount more than $217.50 garnished.

And, the ones who earn a weekly disposable earning of more than $290 can get a maximum of 25% as garnished.

Special Considerations of Garnishment

The limit of garnishment set by the Consumer Credit Protection Act doesn’t apply to:

• Voluntary wage allocations
• Student loans
• Bankruptcy orders
• Child support
• Unpaid tax debt

In a way, Federal agencies are allowed to garnish up to 15% of the wage; while the Department of Education is allowed up to 10%. In case the person doesn’t have any other dependents to support, 60% of wages can get garnished for the purpose of child support.

Also, state and Federal garnishment limits can differ; wherein the lower limit of garnishment will be applied. In case any person is experiencing financial obstacles because of a wage garnishment, they might be eligible for filing a claim to decrease the garnishment amount.