Kristy's Blog

It’s a given that if you leave your student loans, tax debts or child support obligations unpaid, you’ll probably find yourself facing a wage garnishment. What many consumers fail to realize, however, is that commercial creditors, such as collection agencies, can also garnish wages under certain circumstances.

Debt Collection Lawsuits and Civil Judgments

No collection agency can legally seize your wages without first filing and winning a debt collection lawsuit against you. Should the collector win the lawsuit, the court will grant it a civil judgment against you. The collector then becomes a “judgment creditor.” Judgment creditors have the ability to force consumers to pay, giving them a wider ranger of debt collection options than creditors without judgments.

State guidelines vary, but in addition to wage garnishment, a judgment creditor can garnish your bank accounts via a bank levy, or attach a lien to your real estate. In extreme circumstances, a collector may also opt to seize and sell your personal property in lieu of payment.

How Wage Garnishment Works

A collection agency must provide the court with proof of its judgment in order to obtain a writ of execution. The sheriff will then serve the writ of execution on your employer. Once officially served, your employer is bound by law to withhold a portion of your wages each pay period and remit the funds to the debt collector.

If the collection agency doesn’t know where you work, it can request that the court summon you to a post-judgment interrogatory. This is a hearing in which the judgment creditor can ask you a series of questions about your assets and employment. Although answering these questions gives your creditor the information necessary to pursue wage garnishment, refusing to respond or knowingly giving false information could leave you facing contempt charges from the court.

Wage Garnishment Limitation

Even if a debt collector obtains a judgment against you, that doesn’t give the company the right to seize your entire paycheck. The Consumer Credit Protection Act limits the amount that a commercial creditor, such as a collector, can garnish from you per pay period.

Judgment creditors can only garnish your disposable earnings. Often referred to as “take-home pay,” your disposable income is the amount you bring home each pay period after taxes and other legally mandatory deductions. Debt collectors and other commercial creditors are entitled to either 25 percent of your disposable earnings or the amount by which your wages exceed 30 times the minimum wage, whichever is less.

Financial limitations on garnishment aren’t the only protective measures in place that benefit consumers. Because processing a wage garnishment each pay period creates additional work for employers, federal law also prohibits employers from firing an employee due to a wage garnishment order.

As problematic as wage garnishment may seem, it doesn’t last forever. The garnishment order remains in place until the debt is paid off or the debt collector’s judgment expires. State laws vary, but most judgments remain valid for seven to 10 years. Some states grant creditors the right to renew an unpaid judgment before it expires. If the judgment lapses, however, the collector loses the legal right to seize your assets. Your employer must then cease garnishing your wages, even if you have yet to pay off the debt.