The following is presented for informational purposes only and is not intended as legal advice.
If you’ve fallen behind on bill payments, your employer might start taking money directly out of your paycheck and sending it off to repay your creditors or collection agencies. Chances are, if you’re behind on your bills your finances are already strained. This process – called wage garnishment or wage attachment – can strain your finances even further. However, you still have rights and may be able to find a way to lessen or stop the garnishment.
When Your Wages Could Be Garnished
Creditors generally won’t garnish your wages as a first step if you fall behind on a payment. But if other collection efforts have failed, or your debt is approaching the statute of limitations (the end of the period when debt collection is enforceable), wage garnishment could be the creditor’s best option.
If you took out secured loans, such as a mortgage or auto loan, a creditor will likely first repossess or foreclose on your property, and then sell the property to recoup its money. If the sale price doesn’t cover what you owe, the creditor could then try to garnish your wages until you’ve paid the remaining debt.
Before they can garnish your wages, most creditors will need to sue you and get a judgment from the court. The judgment will say how much money you owe, which could include the original debt plus interest and fees. The creditor can use the court order to request your employer withhold part of your pay to cover your debt payments.
Alternatively, unpaid student loans, back taxes, alimony, or child support can lead to administrative wage garnishment (AWG), which can be enforced without a court order.
Limitations On Wage Garnishment
There are federal limitations on which types of income can be garnished and how much money can be taken out.
Generally, the following can’t be touched:
- Social Security disability, retirement, and dependent/survivor benefits
- Supplemental security income (SSI)
- Temporary Assistance for Needy Families (TANF)
- General assistance
- SNAP (food stamps)
- Unemployment insurance benefits
- Veterans' benefits
- Child support
Other types of federal aid may also be exempt and your state may have additional laws that protect certain forms of income.
For garnishable income, the amount that can be taken can vary depending on the type of debt you owe. The limit will often be a percentage of your disposable income, which is the money you receive after taxes and other legally required deductions are withheld from your paycheck:
- Most consumer debt: The lesser of 25 percent or the difference between your disposable income and $217.51 (i.e., 30 times the federal minimum wage of $7.25 an hour. If the minimum wage changes, this will change as well).
- Child support or alimony: Up to 60 percent (or, 50 percent if you have another child or spouse). Your limit may increase by an additional 5 percent if you’re over 12 weeks late.
- Federal student loans: Up to 15 percent
- Back taxes: Up to 15 percent
Page three of this U.S. Department of Labor fact sheet has several examples you can read through to better understand how these limits work. Keep in mind, these are only the federal limits. State laws may have stricter limits and protect a larger portion of your pay.
6 Options If Your Wages Are Being Garnished
You may be able to keep your wages from being garnished or decrease how much is taken out in several ways. As a quick aside, before you start on your own, you could consult with an attorney who has a better understanding of the laws and consumer rights. The Legal Services Corporation, a nonprofit, could help you find low-cost or free legal aid if you’re not sure where to start.
1. Try To Work Something Out With The Creditor
One of the first steps you can take is to try and work with the creditor that wants to garnish your wages. You may be able to negotiate a smaller monthly payment than the amount that would be taken out of your paycheck. Or, you might be able to negotiate a debt settlement and completely wipe-out the debt with a lump sum payment.
2. File a Claim of Exemption
You might be able to file a claim of exemption and stop or decrease the wage garnishment based on your personal and financial situation. For instance, many states offer a head of household exemption for debtors who have a dependent, such as a child or elderly parent, that they financially support.
3. Challenge the Garnishment
You may be able to challenge the wage garnishment on different grounds, such as when more than the appropriate amount of money is being taken out of your paychecks or if the creditor didn’t follow the correct proceedings.
Also, review the documents that the courts or your employer send you to ensure that you actually owe the debt. If a creditor is trying to collect a debt that you don’t owe — such as one you’ve already paid or that was discharged in bankruptcy — that could be grounds for stopping the garnishment and clearing the debt.
4. Consolidate or Refinance Your Debt
Debt consolidation or refinancing involves taking out a new loan to pay off your existing loans. It’s going to be difficult to qualify for a new loan if you’ve fallen so far behind on your bills that your wages are being garnished. However, it may be possible.
You may be able take out a secured loan, such as a home equity loan or home equity line of credit. This isn’t necessarily the best option, as you risk losing your home if you can’t repay the debt, but using the funds to pay off your creditors could stop the garnishment.
5. Work with a Credit Counselor to Get on a Payment Plan
A nonprofit credit counseling organization, such as Money Management International, may be able to negotiate with your creditors on your behalf. You might be able to get on a more manageable payment plan that’s managed by the counseling organization rather than the creditor and the courts.
6. File Bankruptcy
Bankruptcy may seem like an extreme option, but sometimes it’s the best thing to do if you’re buried under debt. By filing for bankruptcy, you may be able to put an immediate halt to the wage garnishment and get the underlying debts discharged. You can schedule an appointment with a credit counselor to learn more about whether bankruptcy might be a good option in your case.