If you’ve fallen behind on debts, creditors can go to court and have part of your paycheck taken directly to pay what you owe. Sounds stressful, right? But don’t worry! In this video, I’ll break down what wage garnishment is, how it works, and what you can do to protect yourself or deal with it.
What Is Wage Garnishment? Wage garnishment happens when a creditor, like a credit card company or the government, takes a part of your paycheck to pay back debt. This can happen if you owe money for things like unpaid credit card bills, medical debt, student loans, or even child support. Most of the time, the creditor has to take you to court and win a judgment. Once that happens, the court tells your employer to take a part of your pay each month and send it directly to the creditor.
There are two main types of garnishment:
- Wage garnishment: Money is taken directly from your paycheck.
- Non Wage garnishment (Bank Levy): Money is taken directly from your bank account.
Common Reasons for Wage Garnishment
- Child support: If you fall behind, up to 60% of your wages could be taken, depending on your situation.
- Federal student loans: Up to 15% of your wages can be taken without a court order if you default.
- Taxes: The IRS can take a portion of your pay depending on how much you earn and how many dependents you have.
How Much Can They Take? How much can be garnished depends on the type of debt and your income. Let’s break it down:
- For consumer debts like credit cards or medical bills, they can take either 25% of your disposable income or the amount by which your weekly earnings exceed 30 times the federal minimum wage—whichever is less.
- If you’re behind on child support, they can take up to 50%, or 60% if you don’t have any other dependents.
- For student loans, up to 15% of your disposable income can be garnished.
Real-Life Scenario Imagine you’re earning $500 a week after taxes, and you owe $3,000 in credit card debt. Your creditor wins in court, and your paycheck is garnished. They could take up to 25% of your weekly earnings—so $125 every week—until the debt is paid off.
What You Can Do
- Work out a different deal: You can contact the creditor and try to negotiate a new payment plan. Creditors would often prefer working something out rather than going through court.
- Challenge the judgment: If you think the garnishment is wrong—maybe the debt isn’t yours, or you’ve already paid it off—you can challenge it in court. You’ll need to act quickly.
- Consult legal aid: If you’re struggling financially, legal aid or a consumer law attorney can help you understand your rights. Many offer services for free or at a low cost.
- Accept the garnishment: If you can, paying the debt off in a lump sum or setting up installments can help you move forward quicker and avoid ongoing wage garnishment.
Protecting Yourself
- Know your exemptions: Federal law caps how much can be taken, but some states have even stricter rules. You may be able to protect more of your income, especially if you’re head of household.
- Act quickly: As soon as you receive a garnishment notice, check the information carefully. If something’s wrong, don’t wait to get it corrected.
Building Your Credit After Garnishment Wage garnishment can hurt your credit score, but it’s not the end of the world. Here’s how to recover:
- Set a budget: Make sure you can cover your basic needs like housing and food, then set aside money to pay off your debts.
- Get a secured credit card: Using a secured credit card responsibly can help rebuild your credit over time.
- Find extra income: Whether it’s through a side hustle or extra hours at work, boosting your income can help you get ahead of your debts faster.
Conclusion: Wage garnishment can feel overwhelming, but remember—you’re not alone, and there are ways to handle it. Talk to your creditors, understand your rights, and don’t be afraid to get help.
