Garnishment

Garnishment summary:

• Garnishment is a legal process where a court orders your employer or your bank to withhold some of your money so that it can be sent to your creditors.

• In most cases, the creditor has to ask the court for permission before they can start a garnishment. Government agencies don’t need a court order, but they still have to notify you in advance.

• There are limits to how much money can be taken in a garnishment, and some kinds of income can’t be garnished at all. 

Garnishment definition and meaning

Wage garnishment is a legal order that tells an employer to take part of an employee's wages and send it to their creditor. The law limits how much money can be taken. Usually, creditors can’t take more than 25% of a debtor's after-tax pay. If the debt owed is for child support, though, they could take more (up to 65%).

Sometimes, a court will order the bank or credit union to take money from a customer's account and send it to a creditor. This form of garnishment is called a levy.

More about garnishment

The law balances the needs and rights of debtors and creditors. It provides many protections for people who owe debt, and it offers creditors several ways to collect money owed to them. One of those is garnishment. 

Garnishment is a court order telling your employer to take money that you've earned and send it to one or more of your creditors. Sometimes, the court order goes to your bank and tells it to send your creditor money from your account. Bank account garnishment is called a levy. 

Garnishment should never be a surprise. First, most creditors have to sue you in court and win a money judgment before they can ask for a garnishment. Even creditors that don't have to sue you first, like government agencies, have to notify you that they intend to garnish your paycheck or bank account. And they have to give you a reasonable time to pay up or respond to them.

How much money can creditors take from you?

Under federal law, a creditor can take the lesser of (A) 25% of your take-home pay each week, or (B) anything above 30 times the federal minimum wage ($710 for a 40-hour week). Here's how you'd calculate a possible garnishment if you take home $1,000 per week:

• Option A: 1,000 * 25% = 250 

• Option B: 1,000 - 710 = 290

In this scenario, your maximum garnishment would usually be $250 per week, because that's the lower amount. However, you might have to pay more for certain types of debt, such as tax debt or past-due child support. Federal law allows courts to garnish up to 65% of your earnings for child support.

You might be able to reduce your garnishment with exemptions if your state offers them. You usually need to go to court, and a judge will decide if your exemption is valid. 

Certain benefits like Social Security, SSI, and veterans’ benefits are usually protected from garnishment and levies. Those kinds of income are automatically protected if you receive the money by direct deposit. You can keep up to two months’ worth of benefits. If you normally receive a paper check that you then deposit into your account, you’ll have to prove that the money is protected. 

Some states also protect a few hundred to a few thousand dollars from levies. When protection isn't automatic, you must prove the funds are protected by filling out paperwork or going to court.