Wage Garnishment

Full definition

Wage garnishment is how an unsecured creditor (like a personal loan lender) ultimately collects a debt after a borrower stops paying and ignores the debt long enough for the creditor to sue. The legal process required: (1) Creditor files a lawsuit in civil court. (2) The court schedules a hearing and serves the defendant. (3) If the defendant does not respond or loses, the court enters a judgment. (4) The creditor files a garnishment order with the court. (5) The court issues a writ of garnishment to the employer. (6) The employer begins withholding. Federal limits: The Consumer Credit Protection Act (CCPA) limits weekly garnishment to the lesser of: 25% of disposable earnings, or the amount by which disposable earnings exceed 30 times the federal minimum wage ($217.50/week at $7.25/hr federal minimum). Many states have lower caps - some states prohibit wage garnishment for consumer debts entirely. Exempt debts: Federally, only certain debt types require no court order: federal student loan default (administrative wage garnishment), IRS tax levies, and child support orders. Personal loan garnishment always requires a court judgment first. Protection from termination: Federal law prohibits employers from firing an employee whose wages are garnished for a single debt. However, multiple garnishment orders do not have this protection in all states. Bankruptcy protection: Filing for bankruptcy triggers an automatic stay that immediately stops wage garnishment (even for student loans, temporarily). Consult a bankruptcy attorney if wage garnishment is imminent.

• Default
• Charge-Off
• Fair Debt Collection Practices Act (FDCPA)