Many indebted people have found themselves in the unpleasant position of seeing their monthly remuneration depleted as a result of garnishing orders. While we may accept the need to repay debt, it seems like such an imposition to take money from your paycheck before you even receive it. Many people wonder if it is even legal. A collections attorney answers this question.
Collection within limits
The simple answer is, yes, it is legal – but within limits. A collection agency can obtain a garnishing order from a court of law or a government agency compelling your employer to hold back a certain amount of your wages and pay it directly to the creditor. However, there are limits to this practice.
First of all, the creditor needs to have taken legal action against you already, filing a lawsuit claiming you failed to pay a debt as agreed. They will then need to obtain a money judgement against you in the amount that you owe and they can then get a garnishing order. There are exceptions to this rule, including unpaid income taxes, child support arrears and defaulted student loans. In these cases, the creditor does not need to first go to court in order to get a garnishing order.
Second, once the order is obtained, there are legal limits as to how much the creditor can take from you. This limitation is imposed by both California law and federal law. For any given pay period, the creditor may garnish the lesser of two variables: 25% of your disposable earnings (i.e. the amount left after you employer makes all required deductions) or the amount by which your disposable earnings exceed 40 times the state hourly minimum wage.
As mentioned before, child support, unpaid income taxes and defaulted student loans are exceptions to the rule. In these cases, creditors don’t need to sue you before obtaining a garnishing order. There are also different requirements regarding the amounts they can have deducted from your wages. With child support, up to 60% of disposable wages can be deducted depending on the situation. With regard to federal student loans, the US Department of Education can deduct no more than 15%, while the IRS will garnish against your back taxes in line with your deduction rate and the number of dependents you have. When it comes to owing back taxes to the state, the California government adheres to the 25% rule that is applied with other debts.
Reducing or stopping a garnishing order
A garnishing order can make it difficult to keep your basic expenses covered, and there are actions you can take to ease the burden. You could find a way to eliminate the debt, be it through total repayment – if that is somehow possible without deepening your debt – or by filing for bankruptcy. You could also reduce the payment amounts by filing a claim of exemption.
For more information on the legal issues and requirements around garnishing, contact The Law Office of Stephen M. Beckwith, an experienced lawyer specializing in all areas of collections and business law. Serving as a collection attorney in Sonoma County for more than 20 years, Stephen M. Beckwith is well equipped to handle any matter relating to debt collections.