What Is Wage Garnishment & How it Affects Your Paycheck

Wage garnishment is a legal process of withholding funds from an employee’s paycheck and sending them to a third party instead. It’s a way to pay off a certain debt, be it child support, a student loan, alimony, a medical bill, or unpaid taxes.

In this article, we’ll break down the meaning of wage garnishment, exploring different reasons for employee wage deductions and the specifics of this debt collection method in the process. In addition, we’ll explain what to do if your pay is intercepted and how to stop wage garnishment.

Let’s start!

Key Takeaways

• Wage garnishment is a deduction of a portion of someone’s earnings used to cover an unpaid debt.
• Wage garnishment can be ordered for private debts, such as personal loans or credit card debts, or public debts, like child support payments or alimony.
• The employer typically needs to start garnishing the employee’s wages within the first payroll period following the notice.
• A person can be exempt from garnishments for private debts if their net pay is equal to or smaller than 30 times the federal minimum wage.
• The debtor can negotiate with the creditor to set up a repayment plan or dispute the garnishment if they believe there has been a mistake.

What Is Wage Garnishment and How Does It Work?

Wage garnishment is a partial deduction of an employee’s earnings used to pay off a certain debt. It’s a legal process in which an employer receives an official notice requiring them to withhold a portion of an employee’s paycheck and redirect it to another party. In this scenario, “another party” is the debt collector, while the employer is known as the garnishee.

The debt collector can be any private creditor, such as a bank, credit card company, debt collection agency, or mortgage company. To trigger the wage garnishment, they have to seek a court order, i.e., sue the employee to prove they owe them money.

The process usually differs for wage garnishment for unpaid taxes (IRS levy) and other public debts, including student loans. Local, state, and federal governments can set the process in motion without taking the debtor to court.

Wage garnishments impact the employees for obvious reasons—they get paid less each pay period until their debt is settled. However, they affect the employer as well, especially because the rules for garnishing wages differ by state and type of garnishment. Moreover, having to talk to an employee about this is often an uncomfortable task for many employers.

With all this in mind, it’s important to note that the employer can’t avoid processing the garnishment by firing the debtor according to federal law.

5 Main Types of Wage Garnishments

The most common types of wage garnishments include child and spousal support, student loans, medical bills, and unpaid taxes.

Here’s a detailed breakdown of each:

#1. Child Support Garnishment

Child support garnishment is a court-ordered deduction of a portion of a person’s earnings to provide financial support for their child. It happens when a parent fails to make agreed-upon child support payments for whatever reason. Their employer then receives the court order instructing them to withhold a particular amount from their paycheck.

This type of garnishment is strictly enforced, and the amount deducted depends on several factors, including the number of children and the state laws. According to federal laws, it typically ranges between 50% and 65% of net pay.

Child support garnishments have priority over other types of garnishments. In other words, if a person has multiple debts, this one gets paid off first.

#2. Student Loan Garnishment

If someone lags behind on their federal student loan payments, the Department of Education or its collection agencies can use Administrative Wage Garnishment (AWG) to pay off the debt. With it, they can take up to 15% of the person’s disposable income without the need for a court order.

This is because, unlike private loans, federal student loans have powerful collection tools that don’t require court approval. However, the borrower is typically notified beforehand and given a chance to either contest the garnishment or set up a repayment plan. If they fail to do so, their employer is instructed to deduct the required amount from their paycheck.

#3. Spousal Support Garnishment

Spousal support garnishment, also known as alimony garnishment, involves deducting wages to support a former spouse financially after a divorce. It’s ordered when one spouse needs financial help to maintain a standard of living similar to the one they had during the marriage.

The withheld amount depends on the duration of the marriage, the financial needs of the spouse receiving support, and the paying spouse’s income.

Courts treat this type of garnishment rather seriously, enforcing them to ensure compliance with divorce settlements or court orders. Although the rules vary from one state to another, contesting or missing payments can lead to penalties.

#4. Medical Bill Garnishment

If a person doesn’t settle their medical bills, they can get turned over to collections, and a creditor gets a court order to garnish wages. However, before this happens, there are usually repeated attempts to collect payment.

If they fail, the creditor has to sue the debtor in court and prove the debt is valid to trigger the garnishment. When they get approval, the employer is directed to deduct a part of the debtor’s wages to repay the remaining medical bills.

As for the amount withheld, federal wage garnishment limits are imposed so that the employee can still meet basic living expenses. This is because medical bill garnishments are especially financially straining due to interest or collection fees.

#5. Tax Garnishment

Not paying federal or state taxes results in tax garnishment, which involves seizing a portion of wages to cover the debt. The process is set in motion either by the IRS or state tax authority without needing a court order. If the debtor ignores warnings and notices, their employer gets a levy instructing them to withhold a part of their earnings to pay off the tax debt.

Factors such as filing status, income level, and number of dependents determine the amount taken so that the employee can still cover essential expenses. Unlike other types, tax garnishment doesn’t have a strict cap, which gives the IRS significant authority.

With this in mind, it’s important to settle tax debts as soon as possible. Otherwise, the IRS can seize bank accounts, tax refunds, and other assets in addition to garnishing wages.

When To Start With Wage Garnishments

You typically need to start with wage garnishments within the payroll period following the notice requiring you to withhold a part of an employee’s earnings. However, the exact timing depends on the type of garnishment, the law governing it, and, of course, your payroll schedule.

For example, if you have a biweekly payroll schedule, you have two weeks at most before you need to begin deducting the specified portion of the employee’s wages. If you have a monthly schedule, however, you’ll have more time to prepare.

That said, here’s what you need to do:

• Talk to the employee and inform them about the garnishment and how to protest it.
• Calculate the amount you have to deduct from the employee’s earnings based on the garnishment order.
• Redirect the specified amount from the employee’s account to the creditor or legal authority.
• Keep records of the garnishment with information about the amount withheld and the start and end dates.
• Inform the legal authority or creditor of an eventual resignation or termination.
• Follow state and federal wage garnishment laws.

How Much of One’s Wages Can Be Garnished?

The amount of one’s wages that can be garnished depends on the type of garnishment and the person’s income. The Consumer Credit Protection Act limits how much disposable income can be seized to pay off a debt.

According to this act, the garnishment amount is the lower of the following two:

• 25% of net pay per pay period
• The amount that exceeds 30 times the federal minimum wage

With this in mind, incomes equal to or lower than 30 times the minimum wage are garnishment exemptions. However, this only goes for private debts, such as credit card debts, medical bills, or personal loans.

That said, you should look up wage garnishment rules by state, as some states offer more protection or use other income-based thresholds.

Wage Garnishment Example

Now that we’ve covered the theory, let’s see a wage garnishment example to understand how this works in practice:

Jane, a marketing assistant, failed to pay back her student loan. Although she was notified of the garnishment, she didn’t set up a repayment plan. As a result, her employer received an order to garnish 15% of her net pay. Since Jane earns $800 a week after taxes, $120 is withheld from each of her paychecks.

This garnishment is visible on her paystub under a deduction labeled “Student Loan Garnishments.” To verify the details, Jane can check her pay stub or ask HR for the garnishment order. In addition, she can contact the loan servicer listed in her notice for balances or disputes.

When Should Wage Garnishment Be Stopped?

The moment when wage garnishment should be stopped depends on the type of garnishment and state law. Still, there are three scenarios in which you can stop withholding funds from an employee's earnings, namely when:

• The garnishment order has been canceled
• The garnishment period has ended
• The debt has been paid off

However, as the employer, you’ll likely receive notice from the creditor or issuing court to stop garnishing wages.

How Wage Garnishments Impact Employees

For the most part, wage garnishments impact employees financially—a part of their paycheck is deducted each pay period, which leaves them with a smaller take-home pay. Moreover, they lower their credit scores despite not appearing directly on their credit reports.

However, the effects aren’t just financial—an employee whose wages are withheld to settle a debt may feel stressed and even embarrassed about the situation. This can lead to a drop in productivity and motivation, which isn’t surprising since the workload stays the same despite smaller paychecks.

What To Do if Your Wages Are Garnished

If your wages are garnished, the first thing you should do is carefully review the garnishment notice. This way, you’ll see who’s garnishing your wages, by how much, and why. You can compare the debt to your records to see if it’s accurate.

If you think the garnishment is a mistake, you can dispute it—reach out to the court or agency to file an objection or request a hearing.

On the other hand, if the garnishment is valid, you can try negotiating with the creditor to set up a repayment plan rather than having your paychecks deducted. While it may not seem like much of a difference, this can give you more control over your finances.

Either way, it’s essential that you create a strict budget, prioritize essential expenses, and closely monitor your spending.

Can Wage Garnishments Be Avoided?

Wage garnishments can be avoided under specific circumstances. For example, if you can’t meet basic needs due to your earnings being withheld, you should research state exemptions or consult an attorney. They can assess your situation, explain your options and legal rights, and even represent you in court proceedings or negotiations if it comes to that.

That said, the best way to avoid wage garnishments is to pay off your debts in time. This way, you can prevent the entire conundrum and ensure there are no interest or fees down the line.

Final Thoughts

Wage garnishment is a partial deduction from someone’s earnings with the purpose of covering their unpaid debts. These debts can be private, such as credit card debts or medical bills, or public, such as alimony or child support payments.

As an employer, when you receive a notice instructing you to withhold an employee’s wages, the first thing you should do is inform said employee. The process itself can be complex, but you can use a pay stub generator, such as Paystub.org, to simplify it. We offer customizable templates that can help you itemize and track deductions in accordance with legal requirements.

Wage Garnishment FAQ

#1. Who can garnish wages without notice?

Federal agencies, such as the IRS or the U.S. Department of Education, can garnish wages without notice or court order. This generally goes for public debts, such as spousal and child support payments.

#2. How can I stop the wage garnishment immediately?

To stop a wage garnishment immediately, you can pay what you owe in full, negotiate a settlement, or file for bankruptcy if eligible. You may also be able to temporarily pause the garnishment by requesting a court hearing to dispute it.

#3. Does garnishment come out before taxes?

No, garnishment doesn’t come out before taxes—it’s deducted after mandatory withholdings, which include taxes. In fact, the garnished amount depends on your net pay, which is what’s left after taxes.

#4. Will a wage garnishment affect my job?

A wage garnishment itself won’t affect your job, work tasks, or position, but your employer is legally obligated to process it. You can minimize the impact by communicating with your employer professionally and settling the debt as soon as possible.

#5. Can an employer fire me for wage garnishment?

An employer can’t fire you for wage garnishment according to federal law. That said, having multiple garnishments may put your job at risk, but this varies depending on state laws.