DEBT MANAGEMENT » Get out of Debt

Owing money is no joke, as anyone who has had his or her wages garnished can tell you. What is wage garnishment? If one of your creditors obtains a judgment against you, they have several ways in which they can legally collect money from you, including:

• seizing your assets
• your bank accounts
• portion of your wages

That's where wage garnishing comes in. If your wages are garnished to fulfill your debt obligation, your employer will be contacted and presented with a writ of garnishment, which allows a portion of your wages to be taken out and given directly to your creditor.

The good news (if there can be said to be any in this scenario) is that there are federal laws that limit the amount that can be withheld from your paycheck and protect you from excessive wage garnishing.

For example: Under current federal law, three-quarters of your disposable earnings are legally exempt from garnishment - you may keep 75%, or thirty times the federal minimum hourly wage. That means that no more than 25% of your check is subject to garnishment, or the amount over thirty times the minimum wage prescribed by Title 29, whichever is less. It also protects you from being fired or discharged because your earnings are being garnished.

Federal law also defines what "disposable earnings" are, and puts a cap on the amount that can be garnished for individuals who are responsible for child or spousal support. So even if your wages are garnished, you can take comfort in knowing that you are protected by federal law and can still meet your obligations for child support and spousal support. However, these laws only apply to judgments for standard credit accounts, such as revolving credit cards and bank loans. If you are being pursued for federal student loans, child support, or alimony, the federal exemptions on wage garnishing will not apply.

Nobody wants to have part of their earnings taken away every week to pay off old debts. But if you're not willing to set aside money yourself, did you know that your creditor can get a judge to do it for you? If your creditor obtains a judgment against you for an unpaid debt, a writ of garnishment is one method they might use to recover the money you owe them. If you have your wages garnished, your employer is legally required to set aside part of your paycheck to satisfy your old debt. If your wages are garnished, you can expect to have a percentage of your wages taken out pay period until the debt is payed off.

What happens when your wages are garnished, and what state laws protect you in the case of wage garnishments? Depending on where you live, some states have laws in place regarding the garnishing of wages. These laws govern the amount that can legally be exempted from garnishment, how much interest a creditor may charge, and the statute of limitations on collecting the debt or judgment. Some states will allow up to 12% interest on a judgment while others will only allow 6% or 7%. It's good to know that if federal law exempts a larger portion of your disposable earnings per week (currently 75%, or thirty times the federal minimum hourly wage of $5.15, whichever is greater), the federal law will supersede whatever state law applies in your case.

Also, keep in mind that the state laws for wage garnishment that are on the books only apply to creditors, such as revolving accounts (credit cards) and bank loans. If your wages are garnished for federal student loans, child support, or alimony, the federal legal exemptions will not apply and you may find yourself liable for much higher amounts.

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