What Happens During Wage Garnishment?

What happens when you owe money you can't pay? There are several ways it can go, depending on what the creditor decides, but one possibility is wage garnishment. Garnishment of wages means that a court (or governmental agency) orders the debtor's employer to send part of the debtor's paycheck directly to the creditor for the purpose of paying off your debt.

Basically, the creditor is cutting out the middleman--in this case, the debtor--and going straight to the source of the cash flow (that is, the debtor's employer.) The exact process varies from state to state, such as the names of the documents or various filing and response deadlines, but the general procedure is the same.


What Happens During Wage Garnishment?

Before the Litigation

The whole thing starts long before any wages are actually garnished: when the debtor first stops (or fails to start) paying on a debt or obligation. This can be any unsecured debt (meaning the debt has no collateral), from credit card debt or student loans to taxes or child support.


Typically, a creditor will exhaust all other options before committing time and money to pursue the matter in court. The debtor will usually receive a final demand letter stating the creditor's intention to take the matter to court if not settled promptly.


Obtaining a Judgment

Generally, the court case will go one of three ways: the debtor will prevail against the creditor (unlikely), the creditor will prove their case against the debtor and win a money judgment, or the debtor will fail to respond to the lawsuit in the specified time period (or at all) and give the creditor a default money judgment.


All child support orders come with money judgments and collection provisions written into them (including wage garnishment), and government agencies (such as the IRS or state tax bureaus) don't need to obtain a money judgment first, so they can skip to this next step.


Collecting on the Judgment

In addition to the original amount owed, the debtor (now a “judgment debtor”) may be ordered to also pay the creditor's (now a “judgment creditor”) attorneys' fees and court costs, plus interest. It is well known in legal circles that winning a judgment is much easier than collecting on it. Often, the judgment debtor simply has no assets to speak of with which to pay a judgment. Hence, garnishing wages-- nearly everyone has at least some income.Again, the exact process varies from state to state and even from court to court, but broadly, the judgment creditor must petition the court in writing for permission to take action to collect the debt, whether by levy or asset seizure or garnishing wages. Once the court approves and signs the petition (sometimes called a request or application) to garnish wages, it becomes a Writ of Garnishment, an official court order.


Notification of Garnishment

Generally, it's the judgment creditor's responsibility to notify the judgment debtor that their wages are about to be garnished, usually via a mailed document. The Writ of Garnishment must be legally delivered to (“served on”) the judgment debtor's employer (the “garnishee”), often by a law enforcement official such as sheriff or constable. The garnishee must then file a response with the court within a certain number of days, including the judgment debtor's employment status, the amount of their salary or wages, and the status of any wage garnishments already in place.


Determining Amount to Garnish

It's the garnishee's job to determine “garnishable wages” for each pay period and retain the earnings as directed by the Writ, then turn the collected money over to the judgment creditor or their attorney within a couple of weeks from the pay period's close. Multiple garnishments can be issued for the same judgment debtor, but the earliest garnishment must be paid in full before the next one can go into effect so that only one is active at a time.


There is a federal cap of 25% of the judgment debtor's disposable income. The federal government defines “disposable income” as what most people call “take-home pay”-- what's left after mandatory deductions like Social Security and Medicare. The judgment debtor must also be left with a balance of at least thirty times the federal minimum hourly wage. These limits do not apply to child support, which can take 50% or more, based on the judgment debtor's other dependents and other factors.


Garnishee's Obligations and Rights

The garnishee has to inform the judgment debtor each pay period of the amount withheld and how that amount was determined. This information may be provided on the judgment debtor's pay stub. The garnishee must also promptly inform the court and all relevant parties if the judgment debtor's employment ends for any reason. The garnishee may not use the garnishment as grounds to fire or dismiss the judgment debtor from their job.


Garnishees who do not follow the court's instructions can be cited for contempt of court and obligated to pay attorneys' fees and court costs, on top of the fine for contempt. However, a garnishee can oppose a garnishment by filing their own motion. Garnishees are not required to turn over property not in their possession or tips that are paid directly to the judgment debtor from customers. They can also claim that the wages fall in one or more exempt categories and therefore not subject to garnishment


Distribution of the Garnished Wages

Payments from the judgment debtor's withheld wages must first be applied to accrued interest, then the judgment principal, and lastly against attorneys' fees and court costs (where applicable.)


At the end of the month, the judgment creditor has a set time in which to send the garnishee and judgment debtor a statement listing the payments received and how those payments were distributed across the interest, principal, fees, and costs. These statements are not filed with the court, but the judgment creditor must keep copies until several months after the garnishment ends, and supply copies to the court or any relevant party that requests to view them.


Ending the Wage Garnishment

The garnishment does not typically stop until the debt is paid in full. Once the debt has been satisfied, the judgment creditor must file a document stating that the judgment has been paid. If they don't file this document, the judgment debtor may file a motion to declare the judgment paid in full regardless.


If the judgment debtor's employment under the garnishee ends, the garnishment will also end a certain period after the employment ends, unless the judgment debtor is re-employed by the same employer. If the judgment creditor doesn't adhere to the court's rules, the garnishment may be vacated or dismissed, and the judgment creditor would be obligated to pay legal fees and costs.


Having your wages garnished can be harsh, but there are several strategies an expert consultant can use to either remove the garnishment entirely or at least reduce it. A third party can negotiate a settlement with the judgment creditor on the judgment debtor's behalf, wherein the judgment creditor agrees to remove the wage garnishment while the judgment debtor agrees to a more reasonable payment plan. Talk to the tax experts at Tax Alliance today to see what options may be available to you.


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