Garnishment

Garnishment summary:

A garnishment is a legal way for creditors to take money you owe debts directly from your wages or bank account.
In most cases, a creditor needs a court order to take your money. Also, they can only take a certain amount of your money at a time.
Bankruptcy can stop garnishments. You may also be able to halt a garnishment order if you resolve the debt with your creditor.

Garnishment definition and meaning

A garnishment is a legal process that allows a creditor to take money from your paychecks or your bank account to satisfy a debt. Garnishments usually require a court order.

For example, if you let a credit card balance go unpaid, the credit card company could bring a debt lawsuit against you. If they win, they can ask the court to allow a wage garnishment.

Not every creditor needs a court order. The IRS and Department of Education are two exceptions. The government doesn't need a court order to garnish your wages for tax debt or federal student loans in default.

If you get hit with a garnishment, you could file for bankruptcy to stop it. You could also try to resolve the debt with your creditors. That means they agree to accept less than you owe but consider the debt satisfied.

Key concept: Garnishment is a legal withholding of money from your paychecks or bank account to pay a debt.

More on garnishment

It's payday, and when you check your direct deposit you notice that it's a little light. So what happened to your money?

If you have unpaid debts, ‌you could have been hit with a garnishment. Garnishment means that a creditor has gotten a court order to take some of your wages or funds in your bank account to satisfy a debt.

A garnishment doesn't appear out of thin air. Most of the time, a creditor needs to file a civil lawsuit and win their case first. If a garnishment happens to you, it's important to know how to deal with it.

Garnishment: a complete breakdown

Garnishment is a way for creditors to get money that they believe you owe when all other efforts to collect a debt have failed.

When you miss a payment on a credit card or a loan, the creditor usually doesn't go straight to garnishment. They first try to get in touch with you through letters, texts, or emails to ask you to pay what's owed.

If you still don't pay, your creditor could go further and bring a debt lawsuit against you. That means the creditor files a case in civil court to try to win a judgment. A judgment can open the door to a garnishment order.

A garnishment stays in place until the debt is satisfied. Federal law offers some protections, but they don't erase your responsibility to pay the debt.

If your wages are garnished, a creditor may take the lesser of:

25% of your disposable earnings, or
The amount by which your disposable earnings exceed 30 times the federal minimum wage. (Disposable earnings means what's left after required amounts are deducted for taxes.)

To put it another way, if you get SSI income by direct deposit, your bank can see where it came from. If a garnishment order comes through, your bank will protect two months’ worth of SSI payments automatically. If you get your SSI on paper checks that you deposit, you might have to talk to your bank to show that your income is protected.

Your state might exempt other types of deposits from garnishment, like child support or alimony. Four states (North Carolina, Pennsylvania, South Carolina, and Texas) don't allow wage garnishment at all for consumer debts.

How to stop garnishment

If your wages or bank accounts are subject to garnishment, it's important to act quickly to minimize the financial damage. The details of your situation can influence how you react. Here are some of the options you might have.

Pay off the debt. The simplest and fastest way to stop a garnishment is to pay what you owe under the terms of the court order.
Claim an exemption. If you have protected deposits, you can claim an exemption for that income. That could stop a creditor from taking money from your bank account.
Challenge the order. The best time to challenge a debt lawsuit is before a judge rules on it. The next best time is once a judgment is entered but before a garnishment takes effect. For example, if you can prove you don't owe the debt, the creditor can't take money from you.
File bankruptcy. Bankruptcy can stop a garnishment order because of what's called an automatic stay. When you file a bankruptcy petition, the court automatically blocks collection actions against you.
Resolve the debt. When you resolve debt, you ask your creditor to accept less than what you owe and forgive the rest. This strategy is more difficult once a garnishment is in place, but there’s no reason you couldn’t make an offer and find out if your creditor is willing to work with you.

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Garnishment FAQs

Can a credit card company garnish your wages?

A credit card company can't garnish your wages until it sues you, wins a judgment, requests, and is granted a Writ of Execution and delivers that to your employer. A Writ of Execution is the official document that forces your employer to send a portion of your pay to the creditor.

When those things happen, your credit card company becomes a “judgment creditor” and can take up to 25% of your income, depending on your state or residence and your income, until your debt is paid‌‌ off.

What is the right of offset?

The right of offset allows a bank or credit union to take money from your bank account—savings, checking, or certificate of deposit—to pay another debt that you have with the same financial institution. If you have a car loan and a savings account with the same bank and you’re behind on the car loan, the bank could exercise its right of offset. They can do this without a court order or any notice to you, but it doesn’t apply to all debts.

Banks can’t use the right of offset to pay off credit card debt. Your bank’s policy on its right to offset should be explained in the agreement you signed when you opened an account.

The right of offset rules vary from state to state. Your state might not allow your bank to take your money if it causes your account balance to go below a certain threshold.

What is a levy?

A levy is a bank account garnishment. Some types of income are protected from the levy, including Social Security benefits, child support payments, and retirement funds, among others.