So one day you get called into your employer’s office and are told that, starting with your next paycheck, the amount of that check will smaller than what you are accustomed to receiving. He or she explains that your wages are being “garnished,” meaning that your employer has to withhold a certain amount and pay it to one of your creditors.
First of all, a creditor just can’t garnish your wages without going through the courts and getting a money judgement. Let’s say you’re way behind on your credit card payments. Perhaps you’ve missed a car payment or two. The creditor can sue you to get a court judgement to have your wages garnished.
However, this is not true in all cases. For example, if you owe back taxes, owe child support or are behind with a student loan these creditors don’t have to bother with the courts. They have a statutory right to take money directly out of your paycheck.
How much can they garnish? The good news is that the creditor cannot confiscate your entire paycheck. For instance, federal law dictates limits on how much money can be garnished, namely 25 percent of your disposable earnings (the amount remaining after mandatory deductions) or the amount by which your disposable earnings for that week exceed 30 times the federal minimum hourly wage, whichever is less. Here in Wisconsin there are stricter limits than provided by federal law, limiting garnishment in most cases to 20 percent or the amount by which your disposable earnings exceed 30 times the federal minimum wage (Wis. Stat. Ann. § 812.34, Wis. Stat. Ann. § 815.18(3)(h).) (“Disposable earnings” means that part of the debtor’s earnings remaining after deducting Social Security taxes and federal and state income taxes listed on the person’s wage statement. (Wis. Stat. Ann. § 812.30(6).).
Let’s say that the resulting amount causes your income to fall below the poverty line. In that case the garnishment is limited to only the amount above the poverty line. (Wis. Stat. Ann. § 812.34.) You can also petition a court for relief if the exemption is insufficient to acquire the necessities of life for you and your dependents. (Wis. Stat. Ann. § 812.38.)
There are also a number of instances where your creditor simply cannot garnish your wages. These include:
– Your household income is below the poverty line. (Wis. Stat. Ann. § 812.34.)
– You receive need-based public assistance (such as supplemental security income, food stamps, or veterans benefits based on needs), have received such assistance within six months before service of the earnings garnishment forms to the garnishee, or have been determined eligible to receive need-based assistance although actual receipt of benefits hasn’t started. (Wis. Stat. Ann. § 812.34.)
– At least 25% of your disposable earnings are assigned by court order for support. (Wis. Stat. Ann. § 812.39(2), Wis. Stat. Ann. § 812.44.)
There are also limits to wage garnishment with respect to child support, student loans and unpaid taxes. However, all court orders for child support include an automatic income withholding order. This means that if you are lagging in your support payments the other parent can get a wage garnishment order from the court. Federal law limits this type of wage garnishment. Your disposable earnings can be garnished by up to 50 percent to pay child support if you’re currently supporting a spouse or a child who isn’t the subject of the order. If you’re not supporting a spouse or a child, up to 60 percent of your earnings can be taken. An additional 5 percent may be taken if you are more than 12 weeks behind in your support payments. (15 U.S.C. § 1673.) Wisconsin follows federal limits. (Wis. Stat. Ann. § 767.75(2r).)
The creditor will continue garnishing your wages until the debt is paid off but there are ways you stop the garnishment. These include:
– Take the matter to court and claim an exemption with the court. Depending on your particular situation and Wisconsin’s exemption laws which determine the amount of income you’ll be able to keep, you might be able to keep most or all of your money.
Should you receive a notice of a wage garnishment order, you may be able to protect or “exempt” some or all of your wages by filing an exemption claim with the court or by raising an objection. This will depend on the type of debt that the creditor is trying to collect as well as state law.
– File for bankruptcy. Wisconsin’s exemption laws determine the amount of income you will be allowed to keep.