assignment of wages

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What Is Wage Assignment?

Definition and example of wage assignment, how wage assignment works, wage assignment vs. wage garnishment.

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A wage assignment is when creditors can take money directly from an employee’s paycheck to repay a debt.

Key Takeaways

• A wage assignment happens when money is taken from your paycheck by a creditor to repay a debt.
• Unlike a wage garnishment, a wage assignment can take place without a court order, and you have the right to cancel it at any time.
• Creditors can only take a portion of your earnings. The laws in your state will dictate how much of your take-home pay your lender can take.

A wage assignment is a voluntary agreement to let a lender take a portion of your paycheck each month to repay a debt. This process allows lenders to take a portion of your wages without taking you to court first.

Borrowers may agree to allow a lender to use wage assignments, for example, when they take out payday loans . The wage assignment can begin without a court order, although the laws about how much they can take from your paycheck vary by state.

For example, in West Virginia, wage assignments are only valid for one year and must be renewed annually. Creditors can only deduct up to 25% of an employee’s take-home pay, and the remaining 75% is exempt, including for an employee’s final paycheck.

If you agree to a wage assignment, that means you voluntarily agree to have money taken out of your paycheck each month to repay a debt.

State laws govern how soon a wage assignment can take place and how much of your paycheck a lender can take. For example, in Illinois, you must be at least 40 days behind on your loan payments before your lender can start a wage assignment. Under Illinois law, your creditor can only take up to 15% of your paycheck. The wage assignment is valid for up to three years after you signed the agreement.

Your creditor typically will send a Notice of Intent to Assign Wages by certified mail to you and your employer. From there, the creditor will send a demand letter to your employer with the total amount that’s in default.

You have the right to stop a wage assignment at any time, and you aren’t required to provide a reason why. If you don’t want the deduction, you can send your employer and creditor a written notice that you want to stop the wage assignment. You will still owe the money, but your lender must use other methods to collect the funds.

Research the laws in your state to see what percentage of your income your lender can take and for how long the agreement is valid.

Wage assignment and wage garnishment are often used interchangeably, but they aren’t the same thing. The main difference between the two is that wage assignments are voluntary while wage garnishments are involuntary. Here are some key differences:

Once you agree to a wage assignment, your lender can automatically take money from your paycheck. No court order is required first, but since the wage assignment is voluntary, you have the right to cancel it at any point.

Wage garnishments are the results of court orders, no matter whether you agree to them or not. If you want to reverse a wage garnishment, you typically have to go through a legal process to reverse the court judgment.

You can also stop many wage garnishments by filing for bankruptcy. And creditors aren’t usually allowed to garnish income from Social Security, disability, child support , or alimony. Ultimately, the laws in your state will dictate how much of your income you’re able to keep under a wage garnishment.

Creditors can’t garnish all of the money in your paycheck. Federal law limits the amount that can be garnished to 25% of the debtor’s disposable income. State laws may further limit how much of your income lenders can seize.

Illinois Legal Aid Online. “ Understanding Wage Assignment .” Accessed Feb. 8, 2022.

West Virginia Division of Labor. “ Wage Assignments / Authorized Payroll Deductions .” Accessed Feb. 8, 2022.

U.S. Department of Labor. “ Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III (CCPA) .” Accessed Feb. 8, 2022.

Sacramento County Public Law Library. “ Exemptions from Enforcement of Judgments in California .” Accessed Feb. 8, 2022.

District Court of Maryland. “ Wage Garnishment .” Accessed Feb. 8, 2022.

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What Is a Wage Assignment?

How wage assignment works.

• Why Are Wage Assignments Voluntary?

Wage Garnishment

The bottom line.

• Credit & Debt
• Debt Management

Wage Assignment: What It Means, How It Works

Wage assignment is the act of taking money directly from an employee's paycheck in order to pay back a debt obligation. Such an automatic withholding plan may be used to pay back a variety of debt obligations, including back taxes, defaulted student loan debt, and both child and spousal support payments.

Key Takeaways

• A wage assignment takes funds directly from an employee's paycheck to pay back a debt.
• How wage assignments are regulated varies by state, with some states even allowing for voluntary child support agreements.
• A wage garnishment is an involuntary deduction and requires a court order.

Wage assignments are typically incurred for debts that have gone unpaid for a prolonged period of time. Employees may sometimes opt for a voluntary wage assignment to pay for things like union dues or to contribute to a retirement fund.

A wage assignment is processed as part of an employer's payroll procedure. The employee's paycheck is decreased by the amount of the assignment and noted on their pay stub.

A wage assignment is often a lender's last resort to receive repayment from a borrower who has previously failed to pay a debt obligation.

Wage assignments are a valuable tool for collecting unpaid debts, but unfortunately, they may be associated with abusive lending practices . If you're struggling with your debt, one of the best debt relief companies or credit counseling agencies may be able to help you get back on track before a wage assignment is incurred.

What Makes Wage Assignments Voluntary?

In a voluntary wage assignment, a worker essentially asks their employer to withhold a portion of their paycheck and send it to a creditor to pay off a debt. Loan agreements may sometimes include a voluntary wage assignment clause in their terms should the borrower default on their loan.

Payday lenders often include voluntary wage assignments into their loan agreements to better their chances of being repaid. Laws regarding wage assignments vary by state.

For example, in West Virginia, wage assignments are capped at 25% of a worker's take-home earnings, the employee and the employer must sign the agreement, and agreements must be renewed annually. Under Illinois law, a lender cannot resort to wage assignment until a debt is 40 days in default. The wage assignment cannot continue for more than three years, and the worker can stop the wage assignment at any time.

Involuntary wage deductions, known as wage garnishments , require a court order and are most likely to be employed to collect spousal and child support payments that have been ordered by a court. Wage garnishments may also be used to collect unpaid court fines or student loans that have been defaulted on.

Several states allow individuals to sign up for voluntary child support agreements. In such a case, both parents must agree to a plan. Once that happens, a voluntary wage assignment may begin. If a child support or welfare agency is involved, they would have to approve any plan.

How Long Can I Have a Wage Assignment?

Since wage assignments are voluntary, the length of time that you use one can vary. Some loans include a wage assignment agreement, so you'll have to check the language of your loan to determine your obligation. Each state also has its own regulations regarding wage assignments.

How Much of My Income Can Go to Wage Assignments?

Every state has its own regulations, but typically 15–25% of your disposable income can be designated for wage assignments.

Is Wage Garnishment the Same as Wage Assignment?

While they are similar, wage garnishment and assignment are not the same. Wage garnishment is an involuntary paycheck deduction, typically ordered to repay child support, student loans, tax debt, or bankruptcy. A wage assignment is voluntary and may be used to repay a consumer debt.

Wage assignments may be a useful tool to help you pay down a debt. Wage assignments are voluntary but they may be hidden in the fine print of some loan products, so read everything carefully before signing. Check the regulations in your state to determine if your wage assignment is revocable.

West Virginia Division of Labor. " Wage Payment and Collection (WPC) Act: Payroll Deductions and Wage Assignments ," Page 3.

Illinois General Assembly. " (740 ILCS 170/) Illinois Wage Assignment Act ."

U.S. Department of Labor. " Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III (CCPA) ."

Illinois Legal Aid. " Understanding Wage Assignment ."

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Wage Assignment: Understanding Types and Real-life Scenarios

Last updated 04/16/2024 by

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Understanding wage assignment

How wage assignment operates, voluntary wage assignment, involuntary wage assignment, legal implications and considerations, regulations and protections, pros and cons of wage assignments.

• Facilitates debt repayment
• May prevent further legal actions
• Structured repayment process
• Reduction in take-home pay
• Potential negative impact on credit
• Legal constraints and limitations

Wage assignment in loan repayment

Wage assignment in child support cases, effects of wage assignment on credit, state-specific wage assignment regulations, florida wage assignment regulations, texas wage assignment limitations, frequently asked questions, is wage assignment the same as wage garnishment, can an employer refuse a wage assignment request from an employee, what legal protections exist for employees regarding wage assignments, can wage assignments be stopped or modified once initiated, do all types of debts qualify for wage assignment, key takeaways.

• Wage assignment involves deducting money from an employee’s paycheck to repay debts.
• It can be voluntary or involuntary, with distinct legal implications.
• State laws govern wage assignments, setting limits on garnishments and durations.
• Employees and employers should understand their rights and obligations regarding wage assignments.

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Wage Garnishment & Assignment: 4 must knows for employers

By Julie Farraj

Feb. 15, 2017

Proper management of wage garnishment can be especially crucial to growing businesses because as their hiring increases, they may also be inadvertently increasing their garnishment liability. That’s why it’s important for an employer to remember four things can help appropriately and accurately process wage garnishments while remaining compliant.

1. All garnishments are not the same.

Here’s a basic wage withholding definition: When an employee fails to repay a debt, a wage withholding court order can be issued against the employee’s earnings to satisfy that debt. This court order — also called a wage garnishment — requires the employer to withhold a portion of the employee’s wages and forward them to a third party. Wage garnishment orders also can be issued by government agencies such as the IRS, state tax agencies and the U.S. Department of Education.

Simple, right? A business receives an order about one of its employees and refers it to its payroll department to process by withholding the appropriate wages and forwarding it to the proper recipient.

There are six common types of wage garnishment. They are:

Child support garnishment comprises by far the highest volume of orders employers process, and, while some of the laws are very standardized, the law can vary by state.

Creditor garnishments are debts that occur when a person is delinquent on consumer payments (e.g. credit card debt). The creditor may take the debtor to court and seek a wage withholding order for the outstanding debt.

Bankruptcy orders . Based on research from the American Bankruptcy Institute , 97 percent of all bankruptcies are personal filings rather than business filings.

Student loans may be collected by the U.S. Department of Education, which may contract with collection agencies to enforce and collect the defaulted loans.

Tax levy garnishments can be issued at the federal, state or local level. Each state differs in its requirements and those laws may differ from federal levies.

Wage assignment occurs when an employee voluntarily agrees to have money withheld from his or her wages. Wage assignments are governed by state law and do not involve a court order. Since they are voluntary and the employee specifies the amount to withhold, they do not fall under the requirements of the Federal Consumer Credit Protection Act.

It’s important that employers keep in mind the type of debt owed, the party collecting it, and the laws applicable to that debt. Knowing which laws, rules, and regulations apply and keeping current on them when processing wage garnishments can be challenging for employers, and, if done incorrectly, may expose employers to various liabilities and penalties.

In addition, the six types of wage garnishments noted above are the most common wage garnishments; employers may receive other less common types of wage garnishments. It’s the employer’s responsibility to comply with and make sure all orders are processed in a timely manner and correctly whether or not they are familiar.

2. Wage garnishment can affect employee productivity and morale.

Most employers recognize that wage garnishment has a direct impact on employees. However, this impact can extend beyond their paychecks. Processing garnishments is not as straightforward as simply withholding wages from an employee’s paycheck and sending a payment. The process is far from simple and can be complicated by myriad emotions.

Employees often find it humiliating because the courts have intervened and employers have become involved in their private struggles.

Employees in this position may feel that they’re now working for the institutions to which they’re indebted rather than for themselves and their futures. Stress and anxiety are often natural extensions of the garnishment process.

An affected employee’s anxiety could show itself through decreased productivity or a lack of motivation. Employers can help affected employees and potentially decrease future garnishments by providing financial wellness training and counseling, as well as tax education, to help employees manage debt.

3. Wage garnishment can affect an employer’s finances and business efficiency.

Employees aren’t the only ones affected by wage garnishment. Employers expose themselves to financial and legal risk when they incorrectly garnish an employee’s wages, fail to file in a timely way, file a defective response, fail to follow specific requirements when sending payments, or make other missteps with a garnishment. Mishandling a garnishment can lead to a judgment against the employer for the entire amount of the employee’s debt, a lawsuit from the creditor or the employee, or other costs or penalties that the employer didn’t anticipate or budget for.

In the instance of garnishments for child support, employers could potentially feel the impact of laws designed to restrict travel. For instance, the Social Security Act was amended in 1997 with a sub-section that established the denial, revocation, or restriction of U.S. passports if the non-custodial parent has child support arrears of $2,500 or more. Additionally, some state agencies have the authority to deny or revoke drivers’ and professional licenses for past-due child support obligations .

If your business requires employees to travel internationally or employs drivers, these laws could impact an employee’s ability to do his or her job effectively and, by extension, impact the efficiency of your business.

Another current area of focus that could impact employers is in the creditor garnishment arena. Currently, the American Payroll Association is working with the Uniform Law Commission to establish a standardized processing for creditor garnishments through the Uniform Wage Garnishment Act, which proposes to standardize the wage-garnishment process for employers, employees and creditors. Currently, state laws differ significantly in their requirements regarding wage garnishment, from the beginning to the end of the garnishment, and are often outdated. This means businesses that operate in multiple states must identify and abide by these different legal requirements, which can potentially lead to processing errors, confusion, inefficiency and noncompliance.

Companies can help manage these challenges if they become familiar with garnishment laws and guidance from agencies such as the Federal Office of Child Support Enforcement, develop reliable and timely procedures for garnishment processing and ensure that policies are administered fairly for all employees facing a wage garnishment.

It may be useful to develop tools, resources and strong contacts with agencies, courts and garnishors. Staying close to these agencies may help your business remain aware of major changes to wage garnishment laws.

Consider participating in state and federally initiated pilot projects. These programs are valuable opportunities to positively build relationships, influence initiatives and provide needed feedback. Make sure you have established a way to monitor legislation that could affect garnishment processing.

Other steps an employer can take include participating with committees, attending conferences regarding wage withholding, and leveraging other contacts you’ve developed with the agencies, those imposing wage garnishments, or other employers.

4. Paper processing is the not the only option.

A study by the ADP Research Institute revealed that 7.2 percent of employees had wages garnished in 2013. Keeping pace with the proper and timely processing of wage garnishments is challenging for many businesses.

As wage garnishment volumes and laws intensify, garnishment processors have the option to use electronic funds transfer, or EFT, to save time, increase efficiency, streamline processes and potentially reduce costs.

Currently, virtually every child support state agency has the ability to accept child support payments via EFT, and some have even mandated employers to send payments electronically. Some tax levy agencies, trustees and student loan agencies also are implementing electronic payment capabilities. In addition to business efficiencies, EFT enables greater security of personally identifiable information, such as Social Security numbers.

Minnesota has passed legislation requiring employers to electronically file their response to a state tax garnishment summons with the state tax agency, and Wayne County Court in Michigan is piloting the option of electronic responses.

Electronic income withholding orders are already very popular. These enable states to electronically distribute income withholding orders and employers to electronically accept or reject them.

Clearly, wage garnishment can have a profound effect on the employee who is being garnished, as well as the employer who must implement the garnishment. It’s important for businesses of all sizes to understand the different types of wage garnishment, familiarize themselves with the laws governing them, and learn ways to accurately and efficiently process them.

Using best practices can help streamline an employer’s responsibilities and ease the potential anxiety an employee may feel with this sometimes-necessary workforce issue.

Julie Farraj is vice president of Garnishment Services for ADP Added Value Services. Comment below or email [email protected].

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Wage Assignments in Consumer and Other Contracts

Most of the time an employee knows when his wages are about to be garnished: He is sued, the court enters a judgment against him for the amount owed, and thereafter a wage garnishment order ensues. The employee has plenty of time to plan for it, forewarn his employer, and make the process as palatable as possible, should a repayment arrangement not be possible.

An employee typically does not learn about this kind of garnishment until after the garnishment has taken place and he notices his pay check is short.

Technically speaking, a wage assignment is a provision in a private agreement — often a consumer credit agreement like the ones used in buying a refrigerator.

The “wage assignment” provision assigns the borrower’s future wages to the creditor in the event of default by non-payment. If a default occurs, the creditor in effect forecloses on the security (the wages) by sending a garnishment demand to the employer. Usually, the letter is written by the creditor’s attorney or billing department.

Most garnishments are based on a judgment or court order and constitute official orders of the court. The request for garnishment is made to the court and the court grants the request by issuing a garnishment order. This is the case for most wage garnishments for child support.

Types of Voluntary Wage Assignments

Voluntary wage assignments, often simply called “wage assignments,” are those that the indebted employee enters into by agreement. He may agree to it by signing a consumer credit or loan agreement, or he may agree to repay a debt by entering into a repayment agreement with a wage assignment provision.

Considering these wage assignments as “voluntarily” is a stretch. Most borrowers don’t read the fine print in consumer contracts and loan papers, have no bargaining strength to oppose these provisions even if they want to, and don’t learn about the wage assignment until it is too late to do anything about it.

In 1970, Congress passed Title III of the Consumer Credit Protection Act. Under that Act, the federal government took control over wage garnishment proceedings for the first time.

Generally speaking, this law limits the extent to which earnings can be garnished to 25% of “disposable earnings” or to amounts above 30 times minimum wage, whichever is less. It also prohibits the employer from terminating an employee for any wage garnishment based on a single debt.

Importantly, the permitted deductions DO NOT include sums withheld as part of a voluntary wage assignment; as such deductions are not legally required. What this means is that wage garnishment protections do not take into account the effect of voluntary wage assignments. Also, they do not apply to real estate purchases (which have specific contracts).

Furthermore, because wage assignments are not technically considered garnishment under federal law, an employer can lawfully terminate an employee for a single garnishment based on a voluntary wage assignment. Put another way, the anti-termination protections of federal law do not apply to wage assignments.

State Law Limitations on Wage Assignments

Many states have passed laws making wage assignments invalid, due to their intrusive and potentially devastating effect on borrowers. Some states bar any form of wage assignment, while others limit wage assignments to only child or spousal support.

Citations/references

Federal statute: title iii, consumer credit protection act (ccpa), 15 usc, §§1671 et seq., code of federal regulations: 29 cfr part 870, u.s. wage and hour division: fact sheet #30 – the federal wage garnishment law, consumer credit protection act’s title iii (ccpa), field operations handbook – 02/09/2001, rev. 644, chapter 16, title iii – consumer credit protection act (wage garnishment), summary of state laws on garnishment: http://www.nolo.com/legal-encyclopedia/free-books/employee-rights-book/chapter2-9.html.

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Wage Assignment Overview

Usually, a creditor has to go to court to take part of your wages. This is called wage garnishment .

However, if you signed a form agreeing to a wage assignment, a creditor can take your wages without first going to court. You may agree to a wage assignment when you sign a loan contract. This allows your creditor to have money deducted from your wages if you don't pay.

Starting a Wage Assignment

You must be at least 40 days behind on your loan before the creditor can have your employer start taking money out of your paycheck.

First, the creditor must mail you and your employer a Notice of Intent to Assign Wages 20 days before they can make the demand. The notice has to be sent to you by certified or registered mail. You should receive advance warning that money will be deducted from your wages.

The notice must follow a specific form and must include the following information:

• be sent to you and your employer;
• be sent by registered or certified mail;
• inform you the creditor will demand part of your wages from your employer in 20 days;
• include a copy of the wage assignment; 
• tell you how much you owe; 
• include your options to respond to the notice; and
• include a revocation notice form.

The creditor then must send a demand letter to your employer. The demand must contain the correct amount in default and include a copy of the assignment. If the notice or demand does not follow the requirements of the law, they have no legal effect.

If you do not revoke the wage assignment, then 20 days later (once the loan is 40 days past due), your employer will start paying a portion of your paycheck to the creditor to pay off your debt.

Day One: Loan is past due

Day 20: Creditor sends notice

Day 40: Wage assignment begins.

Amount of a Wage Assignment

The creditor may take from your paycheck whichever amount is less between the following two options:

• 15% of your total wages, salary, commission, and bonuses for any workweek; or
• The amount your take-home pay (after taxes and other withholdings) for a week is over $630 (which is 45 times the 2024 state minimum hourly wage ).

That means that you can only have a wage assignment if you take home over $630 per week.

Stopping a Wage Assignment

You can stop a wage assignment at any time for any reason. If you don't want the deduction to happen, write a letter to your employer and creditor stating you are canceling the wage assignment. Remember, you will still owe the money. The creditor can use other methods to collect it. That probably means a court case, which may end with an involuntary wage garnishment.

Length of a Wage Assignment

A wage assignment is good for 3 years from the date you signed the wage assignment. But, if you changed jobs after you signed the wage assignment, the wage assignment is only good for 2 years from the date you signed the wage assignment.   If a creditor tries to collect money from your paycheck after the time period expires, you should talk to a lawyer. You might be able to sue the creditor in court.

Note : Child support and student loans can also result in garnishments without a court case.

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Wage Assignment

What is a Wage Assignment?

A wage assignment refers to a forced payment of a financial obligation via automatic withholding from an employee's pay.

How Does a Wage Assignment Work?

Courts can subject individuals who become delinquent in their obligations to wage assignments. In most cases, wage assignments are ordered when a person is delinquent on child support , spousal support , taxes or loans . If the obligor shows a history of nonpayment, a wage assignment can be used to automatically subtract money owed from his or her payroll without his or her consent. For example, if an individual becomes delinquent on $100 monthly loan payments, a wage assignment automatically deducts the $100 from the person's weekly or monthly paycheck and sends it to the lender .

Why Does a Wage Assignment Matter?

Wage assignments are frequently ordered in connection with delinquent child support payments and merchant credit balances. Though unlawful in certain U.S. states, wage assignments can be a useful, proactive method for recouping long-term unpaid debts .

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Wage assignment and employers’ responsibilities

Tough economic times raise some tricky HR issues—for example, when an employee’s financial straits begin to affect his employer.

Must we honor a payday loan wage assignment?

Q. An employee borrowed money from a payday loan service at a very high interest rate that I feel is unfair. The payday loan service sent me a “wage assignment” notice and told me that our company must withhold money from his paychecks.  What is a wage assignment, and does our company actually have to honor it? A. A wage assignment is a document that allows a creditor to attach part of the employee’s wages if the employee fails to pay a specific debt. The creditor does not have to obtain a judgment in a court proceeding before requesting payment. Under the Illinois Wage Assignment Act (740 ILCS 170), private employers are obligated to honor a creditor’s properly served demand for a valid wage assignment, unless an employee presents a timely, valid , written defense to the wage assignment.

What constitutes a valid assignment?

Q. How can I tell if a wage assignment is valid? How long is it valid? A. A valid wage assignment document must have the words “Wage Assignment” printed or written in boldface letters of not less than ¼ inch in height at the head of the wage assignment and one inch above or below the line where the employee signs the assignment. The employee must have signed the document in person, and the document must show the date of execution, the employee’s Social Security number, the name of the employer at the time of execution, the amount of money loaned or the price of the articles sold or other consideration given, the rate of interest or time-price differential to be paid, if any, and the date on which such payments are due. A wage assignment is valid for no more than three years after the employee signs it and the employer’s name appears on it. If the employee changes jobs, the wage assignment is valid for two years, even though the new employer’s name does not appear on the assignment.

Handling wage assignments

Q. How does the wage assignment process start? A. Assuming that the wage assignment document complies with the formal requirements, the creditor must serve “demand to withhold” on the employer. The demand is valid only if:

The employee has defaulted on the debt secured by the assignment for more than 40 days, and the default has continued to the date of the demand.

The demand contains a correct statement of the amount the employee is in default, and the creditor provides an original or a photocopy of the assignment to the employer.

The creditor has served a “notice of intention to make the demand” upon the employee, with a copy to the employer, by registered or certified mail not less than 20 days before serving the demand.

Putting on the brakes

Q. Can an employee stop the wage assignment process? A. The employee does have a right to contest the demand. If an employee has a legal defense to the wage assignment, the employee may—within 20 days after receiving a notice of demand or within five days after the employer is served with the demand—notify the employer, in writing, of any defense to the wage assignment and send a copy of the written defense to the creditor by registered or certified mail.   As a result, the employee’s wages are not subject to a demand served by the creditor unless the employer receives a copy of a subsequent written agreement between the creditor and the employee authorizing such payments. Similarly, if the creditor receives a copy of the defense prior to serving its demand upon the employer, the creditor may not serve the demand upon the employer.  Whether the employee’s defense is legally valid is not an issue the employer must resolve. Instead, the employee and the creditor may attempt to reach another agreement or the creditor may simply bring a separate lawsuit against the employee to collect an outstanding debt. 

Calculating the wage assignment payment

Q. How much must the employer withhold—and when? A. The employer must begin payment to the creditor no sooner than five business days after service of such a demand.  The employer must withhold the lesser of:

15% of weekly gross wages

The amount by which the disposable earnings for a week (pay remaining after federal and state taxes, Social Security deductions and any other amounts required by law to be withheld, including required retirement contributions) exceed 45 times the federal minimum wage, unless a notice of defense is received within that five-day period.

The employer shall be paid a fee of $12 for each wage assignment. That $12 is credited against the debt.

WHAT TO READ NEXT

How to Protect Wages and Benefits from Creditors

Why attorneys need to know about wage garnishment and bank account seizures.

With the explosion of creditor and debt buyer-initiated collection lawsuits, there is a parallel dramatic increase in judgment creditors garnishing consumer wages and seizing bank accounts. This article explains how to evaluate and minimize a consumer’s exposure to such post-judgment creditor remedies and describes federal protections and also state protections in each of the fifty states.

It is just as important to understand a client’s exposure to wage garnishment and bank account seizure when representing a client who is not yet subject to post-judgment remedies, but who has recently been sued or who may be sued. The client’s exposure to post-judgment remedies will affect not only the size of any possible settlement (or even the client’s reason to offer any settlement), but also will affect the resources that should be devoted to the defense of a collection action.

Apart from any pending collection lawsuit, clients should also be advised about which of their debts to pay first. Knowing whether wages or benefits will eventually be lost if a particular unsecured creditor is not paid is an essential factor in determining the priority that such a debt should be given in relation to a client’s other financial obligations.

Other than student loan debts, almost all unsecured consumer debt can be eliminated in bankruptcy. But an analysis of the risk the client faces from unpaid, unsecured debts plays an important role in deciding whether to file bankruptcy. Filing for bankruptcy too soon—before there is a real need—is not only expensive and time-consuming, but it can also deprive the consumer of bankruptcy protection when new debts arise in the future.

This article provides a summary of federal and state law protections and provides a number of practice tips. Far more detail on protecting a client’s wages, public benefits, and bank accounts, as well as other personal and real property is provided in the resources listed at the end of this article.

State Law Often Is Key to Protecting Wages from Garnishment

A creditor that obtains a judgment on a debt can garnish the consumer’s wages, meaning that it can obtain an order requiring the consumer’s employer to send a portion of the consumer’s wages directly to it. Federal law protects from garnishment 75% of a consumer’s disposable earnings or 30 times the federal minimum wage ($217.50 per week), whichever is greater. The creditor can seize the balance.

Disposable earnings are the employee’s earnings after deduction of amounts required by law to be withheld. Amounts withheld include federal, state, and local taxes, Social Security, and contributions to other governmental retirement programs that are required by law. See NCLC’s Collection Actions § 14.2.1 for more on the definition of “disposable wages,” what income is protected, the treatment of multiple wage garnishment orders, and all other aspects of the federal wage garnishment protections.

These federal protections provide a baseline of protected wages, and most states provide significant additional protections from wage garnishment. With few exceptions, all wages are fully protected from garnishment in four states: North Carolina, Pennsylvania, South Carolina, and Texas. However, judgment creditors sometimes seek to evade these protections by serving the wage garnishment order on the consumer’s employer’s office in another state. For example, if a Texas debtor worked for a Texas employer that also had an office in Oklahoma, the judgment creditor might serve the wage garnishment order on the Oklahoma office, seeking to take advantage of Oklahoma’s lesser protection of wages. See NCLC’s Collection Actions § 13.3.8 .

Ten states protect both a higher percentage of wages and a higher amount per week than federal law requires:

• California, which protects 40 times the state, federal, or local minimum wage and allows garnishment of just 50% of the debtor’s wages in excess of that amount;
• Colorado (80% or 40 times the state minimum wage of $11.10);
• Illinois (85% or 35 times the federal minimum wage or the state minimum wage of $8.25);
• Massachusetts (85% or 50 times the state minimum wage of $12);
• Nevada (82% or 50 times the federal minimum wage);
• New York (90% or 30 times the federal minimum wage or the state minimum wage, which ranges from $11.10 to $15));
• South Dakota (80% or 40 times the federal minimum wage or the state minimum wage of $9.10, plus $25 per dependent);
• Vermont (85% or 40 times the federal minimum wage);
• Washington (80% or 35 times the state minimum wage of $12); and
• West Virginia (80% or 50 times the federal minimum wage).

Protecting a higher multiple of the minimum wage—a higher flat amount—means that more low-income debtors will have all their wages protected. Protecting a higher percentage of the debtor’s earnings benefits workers at all income levels.

Thirteen jurisdictions protect a higher flat amount per week, but do not protect a higher percentage of wages than the federal minimum. These states are:

• Alaska ($743 a week if the debtor is the household’s sole support);
• Connecticut ($404);
• District of Columbia ($560);
• Iowa ($290);
• Maine ($440);
• Minnesota ($290);
• New Hampshire ($362.50);
• New Mexico ($290);
• North Dakota ($290 plus $20 per dependent);
• Oregon ($254);
• Tennessee ($217.50 plus $2.50 per child);
• Wisconsin (the federal poverty amount); and
• Virginia ($290 plus extra for children in low income families).

Six states protect a higher percentage of wages than federal law requires but not a higher flat amount:

• Delaware (85%);
• Hawaii (protects 95% of first $100, 90% of next $100, 80% of remainder);
• New Jersey (90% of wages if the debtor is under 250% of poverty);
• Missouri (90%);
• Nebraska (85%); and
• Virgin Islands (90%).

Nineteen jurisdictions do not offer protections greater than the federal minimum: Alabama, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Montana, Ohio, Oklahoma, Puerto Rico, Rhode Island, Utah, and Wyoming.

Seven jurisdictions provide for hardship exemptions in addition to the percentage or dollar amount protections. How these exemptions work will vary by state, but consumers should seek this protection where applicable in Arizona, California, Colorado, District of Columbia, Indiana, Oklahoma, and Wisconsin. In addition, New York, Minnesota, and Rhode Island provide exemptions for debtors based on receipt of or, in Minnesota and New York, eligibility for public assistance. For more detail on hardship exemptions, see NCLC’s Collection Actions § 14.2.3.3 .

For a more comprehensive analysis of state restrictions on wage garnishment, state remedies, and the relationship between federal and state exemptions, see generally NCLC’s Collection Actions § 14.2.3 and Appendix G . See also NCLC’s No Fresh Start in 2019: How States Still Allow Debt Collectors to Push Families Into Poverty (Nov. 2019) .

Tips to Limit Wage Garnishment

Make sure the consumer is adequately withholding taxes. If not enough taxes are withheld, not only is there a tax liability at the end of the year, but an additional amount will be garnished from the consumer’s paycheck.

Federal and state wage garnishment limits apply to the cumulative amount of all garnishments sought by multiple creditors in a given pay period. For example, if the consumer’s wages are being withheld to pay child support, the amount withheld reduces dollar for dollar the maximum amount that can go to other creditors. Where a consumer is obligated to pay child support, if that obligation is paid through a payroll deduction rather than voluntarily, the consumer is protected from a judgment creditor’s garnishment. See NCLC’s Collection Actions § 14.2.1.5.5 .

Wage Assignments Are Illegal

Creditors may seek to avoid state and federal protections from wage garnishment and even the necessity to obtain a court judgment by asking the consumer as part of the initial credit agreement to sign a wage assignment. A wage assignment instructs the consumer’s employer to send a portion of the consumer’s pay to the creditor each pay period. Courts have held that the federal law that limits the amount of a wage garnishment protection does not apply to wage assignments. See NCLC’s Collection Actions § 14.2.1.2 .

The Federal Trade Commission’s Credit Practices Rule prohibits wage assignments in connection with the extension of credit to consumers in or affecting commerce. 16 C.F.R. § 444.2(a)(3). Only three exceptions are allowed: if the assignment is by its terms revocable at will by the debtor; if the assignment is a payroll deduction plan that commences at the time of the transaction; or if the assignment is of wages already earned at the time the consumer entered into the wage assignment.

If a consumer has entered into a wage assignment with a creditor, such as a payday lender, the consumer should immediately revoke the assignment. If the assignment is irrevocable and does not fall into one of the other exceptions, then this is a violation of the FTC rule. While there is no direct private right of action for a violation of an FTC rule, a rule violation should be an unfair or deceptive practice under a state UDAP statute, leading to strong private remedies. For more detail on wage assignments and remedies, see NCLC’s Collection Actions § 14.2.5 .

Federal Student Loan Wage Garnishment Is a Different Animal

Federal law allows administrative wage garnishment—a garnishment issued by a federal agency rather than a court, and without any court judgment—to collect student loan debts and other federal debts. Up to fifteen percent of the borrower’s disposable wages can be seized through a single administrative wage garnishment order. State law wage garnishment protections do not apply, but federal protections do apply.

The general federal limit on wage garnishment applies to these administrative student loan garnishments. See 34 C.F.R. § 34.19(b). Thus a minimum of 30 times the federal minimum wage—$217.50 a week—of disposable earnings is fully protected. In addition, the 15% federal student loan garnishment counts toward the 25% federal wage garnishment limit, so that a second garnishment by a private creditor could only seize 10% of the debtor’s income.

Student loan borrowers can also object to the administrative garnishment on the basis of financial hardship. See NCLC’s Student Loan Law § 9.3.2.3.4 . If they instead enter into a rehabilitation plan, garnishment stops after the borrower makes five payments. See NCLC’s Student Loan Law § 9.3.2.4 .

Student loan borrowers can also head off garnishment by entering into a repayment plan or consolidating their loans before the garnishment begins. Consolidation means that the loan is no longer in default and thus is not subject to garnishment. But consolidation is not allowed once the garnishment order has been entered. See NCLC’s Student Loan Law § 9.3.2.4.2 .

The United States, but Not Private Creditors, Can Offset Debts Against Social Security and Certain Other Federal Benefits

Federal law protects Social Security, SSI, VA benefits, and certain other federal benefits against garnishment for ordinary non-federal debt. In other words, an ordinary judgment creditor cannot require the Social Security Administration or the Department of Veterans Affairs to withhold any portion of a debtor’s benefits to pay a judgment debt.

On the other hand, the United States can offset debts owed to it against certain federal benefit payments. The United States can seize only that portion of a monthly benefit payment that is in excess of $750, and the maximum seizure is 15% of a monthly benefit payment. See NCLC’s Student Loan Law § 9.4.2 .

Federal regulations require the debtor to be given advance notice and an opportunity for administrative review before the offset occurs. In the case of student loans, the borrower can also apply for a hardship reduction of the amount offset. See NCLC’s Student Loan Law § 9.4.3.2 .

Protecting Benefits from Seizure Once Deposited in a Consumer’s Bank Account

While federal and state benefit payments are exempt from garnishment by private judgment creditors while in the hands of the disbursing agency, the benefit’s exempt status becomes murky once deposited in a bank account. A bank that receives a garnishment order from a judgment creditor may freeze all funds in the account, whether the funds are exempt or not. The usual rule is that the consumer bears the burden of proving that certain funds are exempt, and failure to do so will result in the funds being sent to the judgment creditor.

Fortunately for consumers, an important U.S. Treasury rule requires banks to protect any Social Security, SSI, VA, or certain other federal benefits that were directly deposited into a consumer’s bank account within the preceding two months. 31 C.F.R. § 212. For a thorough analysis of the Treasury rule, see NCLC’s Collection Actions § 14.5.4 .

The Treasury rule only protects two months of Social Security, SSI, or VA benefits. If the consumer has accumulated more than two months of benefits in the account, the rule does not apply to the excess. Nor does the rule apply to state benefits or to benefit payments paid by check as opposed to direct deposit. In all of these cases, the benefits may still be exempt, but the bank is not required to protect them. The consumer has the burden of proving the exemption, and in the meantime the bank will freeze the account.

Another way to protect Social Security, SSI, and VA benefits from seizure is to have them deposited directly from the Treasury to a Direct Express prepaid card. Funds deposited onto Direct Express cards are completely exempt from garnishment by judgment creditors. The consumer then uses the card like any debit card to obtain cash or to make purchases. The card is provided by a private bank under contract with the United States. To sign up for a Direct Express card, call 1-800-3333-1795 or visit www.usdirectexpress.com. See NCLC’s Collection Actions § 14.5.5.2 .

If the consumer retains exempt funds in a bank account not protected by the U.S. Treasury Rule, one option is to create two accounts, one account holding only exempt funds. This makes it easier for the consumer to prove that funds in one of the accounts are exempt from seizure, because it eliminates the complications caused by commingling of exempt funds with non-exempt funds. If the consumer opens two accounts, the consumer should first spend down funds from the non-exempt account before using the exempt funds.

State Law Protecting Wages Once Deposited in a Bank Account

Unless funds are exempt, judgment creditors can seize funds from a consumer’s bank account to pay a judgment against the consumer. While federal and state laws protect wages before they are distributed to the consumer, the wages may be subject to seizure once deposited in the consumer’s bank account, absent state law to the contrary. For a detailed description of applicable law protecting wages and benefits deposited in a bank account, see NCLC’s Collection Actions § 14.5 . See also NCLC’s No Fresh Start in 2019: How States Still Allow Debt Collectors to Push Families into Poverty (Nov. 2019) . This article provides a summary of state law exemptions protecting bank accounts from judgment creditors. Additional or different exemptions may apply in a bankruptcy proceeding.

A key distinction is whether an exemption for funds in the consumer’s bank account is self-executing or whether the consumer must take affirmative action to present the exemption. If an exemption is self-executing, the bank will protect the funds without the consumer having to claim an exemption, so there will not be a period of time when the account is frozen.

Some state exemptions are self-executing. For example, New York’s exemption of $2,664 to $3,600 (depending on the applicable state minimum wage) in the consumer’s bank account is self-executing. The consumer need take no action to protect the funds and they are not subject to a bank freeze. Effective September 1, 2020, the same will be the case in California with a $1724 exemption.

An example of an exemption that is not self-executing is a wildcard exemption that allows the consumer to designate the property to which the wildcard dollar exemption applies. To make a wildcard exemption effective, the consumer must affirmatively initiate a process to apply the exemption to the consumer’s bank account, and the account may be frozen until the process is successfully completed.

About two-thirds of the states give debtors a wildcard exemption that can be applied to property of the debtor’s choice. In fifteen states—Alabama, District of Columbia, Florida, Illinois, Maryland, Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, South Dakota, Tennessee, Virginia, and Washington—it appears that the consumer can apply the wildcard exemption to a bank account. In some of these states the exemption law explicitly allows the wildcard to be so applied, and in others the exemption law is ambiguous but there are cases in which courts have allowed the wildcard to be used to protect a bank account. Of course, consumers may prefer to apply the wildcard exemption to protect the consumer’s car or other property instead of or in addition to the bank account.

In a number of states, the exemption law explicitly provides that the wage garnishment exemption continues after the wages are deposited into a bank account, and in other states courts have interpreted the statute to protect deposited wages. All in all, it appears that deposited wages continue to be exempt in thirteen jurisdictions: California, Colorado, Connecticut, Florida, Idaho, Iowa, Minnesota, Montana, Nebraska, North Carolina, Oklahoma, Oregon, and Puerto Rico. This protection is not self-executing, however. The bank does not know the dollar amount of the consumer’s wages that are exempt from seizure, and the consumer must prove this amount. In addition, the exempt portion of wages will be commingled in the account with the non-exempt portion of wages and other non-exempt deposits. Issues will arise as to whether the withdrawals from the account were of exempt or non-exempt funds, affecting the exempt status of funds left in the account. The whole account may be frozen in the interim.

Thirteen states follow a third approach to exempt a certain dollar amount in the consumer’s bank account no matter their source:

• Alaska ($2,970 under certain conditions);
• Arizona ($300);
• California ($1,724 effective Sept. 1, 2020);
• Indiana ($350);
• Massachusetts ($2,500);
• New York ($2,664–$3,600);
• North Dakota ($3,000);
• Ohio ($500);
• Puerto Rico ($400);
• South Carolina ($6,100);
• Vermont ($700);
• West Virginia ($1,100); and
• Wisconsin ($5,000).

Whether such an exemption is self-executing or not will depend on state law and practice.

Practice Tips for Dealing with Bank Account Freezes and Seizures

Often a bank account will be in the name of two individuals. If there is a judgment against one of the account holders but not against the other, a bank account garnishment could result in seizure of funds belonging to the non-debtor, not just the debtor’s funds. Even if state law provides that a portion of a joint account is exempt from seizure for the other joint-owner’s debts, the whole account may be frozen until a determination is made as to what part belongs to each joint account holder. Where one of two account holders owes a judgment debt, consider splitting the joint account into two accounts and keeping all of the non-debtor’s funds in the account that is solely in the non-debtor’s name. Paying expenses first from the account that is in the judgment debtor’s name will reduce the balance in that account and minimize the amount that is vulnerable to garnishment.

Judgment creditors may seek to seize any bank account with the consumer’s name on it, even if the funds in the account do not belong to the consumer. Consumers who have or expect to have a judgment entered against them should remove their names from any account that holds someone else’s money (for example, accounts containing funds owned by another family member, such as an elderly parent or a child). If the owner of the funds needs the consumer to manage the account, a power of attorney should be used or the account should be clearly designated as a trust.

Consumers may also be able to limit the risk of seizure of their funds by placing the funds on a prepaid card instead of in a bank account or, if available from their employer, receiving wages on a payroll card. Funds in prepaid and payroll card accounts may be subject to seizure, but as a practical matter judgment creditors are far less likely to seize these types of accounts. Employers increasingly offer employees the option to have wages deposited in payroll card account, and this may be a good choice, but be sure to check the fees and understand how to avoid them, especially by using only ATMs in the card’s network.

Watch out because prepaid cards (and bank accounts) can have high fees or other disadvantages. Avoid prepaid cards, debit cards, or “checkless checking” accounts offered by payday lenders and check cashers, which may have high fees or even overdraft fees. The overdraft “protection” these accounts may offer is really just permission to charge fees and to push people into a cycle of debt. Safe accounts are never a vehicle for borrowing, but only for the storing and spending of money that the consumer already has.

Consumers can also avoid seizure of their funds by placing the funds on a prepaid card instead of in a bank account. It is true that prepaid cards are linked to a bank account, and that account may be subject to seizure, but as a practical matter judgment creditors are far less likely to seize accounts linked to prepaid cards. Employers increasingly offer employees the option of having wages deposited in a special employee prepaid card, and this may be a good choice. Watch out because prepaid cards can have high fees or other disadvantages, but so do many bank accounts. Avoid prepaid cards that allow for high overdraft fees. Prepaid cards should never be a vehicle for borrowing, but only for the storing and spending of money that the consumer already has.

Seizure can also be avoided by opting out of direct deposit payments to a bank account and receiving paper checks. Paper checks do have a greater risk of theft and loss. Paper checks also will have to be cashed. Avoid expensive check cashers. Look for local stores or friends or relatives to cash a check without high fees. Checks from a major employer in a community are safe bets to cash. Even if the consumer must pay a fee to cash a check, that may be better than having the check deposited and then seized in its entirety or at least frozen.

Resources for More Information

• NCLC’s Collection Actions Appendix G and also NCLC’s Consumer Bankruptcy Law and Practice Appendix J provide detailed state-by-state summaries of each state’s exemption laws that apply to wages, homestead, tangible personal property, benefits, retirement plans, other intangibles, and tax refunds. Statutory citations are provided, and details regarding extraterritorial application and the relation of state exemptions to federal bankruptcy exemptions are also listed.
• NCLC’s Collection Actions Chapter 13 (Enforcement of Judgments), Chapter 14 (Protecting Debtors’ Wages, Benefits, Other Income, and Bank Accounts), Chapter 15 (Protecting the Debtor’s Home, Tangible Personal Property, and Other Assets), and Chapter 16 (Debtor’s Examinations and Imprisonment for Debt).
• NCLC’s Student Loan Law Chapter 9 (Seizures of Income and Assets to Collect Federal Student Loans).
• NCLC’s No Fresh Start in 2019: How States Still Allow Debt Collectors to Push Families Into Poverty (Nov. 2019) (109 pp.) is a detailed report on the state of exemption law in all 50 states with recommendations for reform.

Meet the author

Carolyn Carter is deputy director at the National Consumer Law Center (NCLC) and previously served as director of advocacy. She is the recipient of the NCLC’s 1992 Vern Countryman Award and served on the Federal Reserve Board’s Consumer Advisory Council from 2005-2007.

She is a co-author or contributor to a number of NCLC’s treatises, including Unfair and Deceptive Acts and Practices , Federal Deception Law , Collection Actions and Consumer Warranty Law and is a contributor to a number of other NCLC treatises. She is co-author of several recent NCLC reports, including No Fresh Start 2023: Will States Let Debt Collectors Push Families Into Poverty as Economic Uncertainty Looms?

Before joining NCLC, she was co-director of a legal services program in Pennsylvania and was a staff attorney and then law reform director at the Legal Aid Society of Cleveland.

Education: 

J.D. Yale Law School

B.A. Brown University

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Wage Garnishments (Assignment Orders)

In family law, a wage garnishment is a court order that directs an employer to withhold a portion of an employee’s income, and thereafter deliver that withheld income directly to a third person (payee) to pay the employee’s (debtor’s) unpaid court ordered child support or spousal support.

Wage garnishments are legally enforceable against the employer and the employee; willful failure to comply with wage garnishment orders can lead to severe civil and criminal penalties.

For example, if a business owner receives a wage garnishment notice (court order), which informs the employer that he or she must keep a portion of his or her employee’s income from the employee, and the business owner thereafter willfully disobeys that court order, then the business owner could be found to be in contempt of court.

Also, if the owner of the business is the person whose wages are garnished, and he or she does not keep his or her own wages aside per the court’s order, then the business owner could be found to be in contempt of court.

Note: The term wage garnishment is sometimes referred to in family law court as either a wage assignment, earnings assignment, income earnings assignment, or withholding order . All of these terms share very similar, but not exact, definitions. The garnishment of wages, or the “withholding” of wages (income) is the act of keeping the wages from the employee. The assignment of wages (income) is the act of giving another person the right to receive the wages (income, earnings, salary, etc.).

Obtaining a Wage Garnishment

When a family law judge orders a person to pay child support or spousal support, then the person so ordered should be given an opportunity to comply with the court’s order (without further legal action such as a wage garnishment). If the person ordered to pay child support or spousal support willfully fails to pay pursuant to the court’s order, then the payee may seek an order for wage garnishment (earnings assignment, withhold order, etc.) against the debtor (payer).

For example, if a family law judge orders wife to pay her ex-husband spousal support, then wife will usually be given an opportunity to comply with the court’s order to pay spousal support without the issuance of a wage garnishment (opportunity to comply with court’s order). However, if wife refuses to pay spousal support as ordered, then her ex-husband may seek a court-ordered wage garnishment against husband.

Note: As stated, a person will usually be given an opportunity to pay child support or spousal support (alimony) without ordering a third person (employer) to garnish the non-paying party’s income. But, in some cases, a judge may allow a wage garnishment to issue even before the paying party is given an opportunity to comply with the court’s order (i.e. business is dissolving, employee cannot be found, etc.).;

Important: There are different legal remedies that might be available to a payee when a debtor fails to pay court ordered child support or spousal support. A payee should consider all legal options when a debtor fails to pay support, including, but not limited to, the following: civil penalties, contempt of court, modification of court orders, referral to Department of Child Support Services [DCSS]) , and more.

Every legal remedy accompanies certain benefits and detriments and wage garnishments might not necessarily be in the payee’s best interest in light of other available legal remedies. It's important to seek the advice of a family law attorney to learn the availability of all legal remedies and the legal benefits, as well as all legal detriments, which are associated with each legal remedy.

Where to Start: Before a family law litigant may have a wage garnishment ordered, the court will usually require the requesting party to show that a wage garnishment is necessary because the debtor has willfully failed to pay court ordered support. If the court grants the payee's request for a wage garnishment, the order must be timely and properly served on the debtor’s employer in order to become valid.

Note: The wage garnishment order informs the employer of the percentage of income that is to be deducted from the employee’s paycheck and where to send that deducted payment.

An employer must begin withholding child support monies within ten (10) days of the receipt of the wage garnishment. The withheld monies must be remitted within seven business days after the employee’s regular payday to the person or entity named in the Income Withholding Order (IWO).

Percentage of Income Withheld for Child Support: Child support wage garnishments cannot exceed fifty percent (50%) of the employee’s disposable income. Disposable income refer to the employee’s net pay (including bonus income), after taxes, unemployment insurance, and social security is deducted. Deductions do not include health and/or dental insurance, charitable or retirement contributions, and non-required union dues.

Note: Past due child support or spousal support (arrears) may also be withheld from an employee’s income; however, withholding for arrears may be “stayed” for good cause as determined by the family law judge. In this context, “stayed” for good cause means that the employee debtor does not have to pay, as a withholding, unless and until some subsequent condition arises (i.e. passage of time, future violations of the court’s order, etc.).

Self-Employed & Independent Contractors

For self-employed debtors, the rules regarding wage garnishment do not change. In other words, a self-employed person may be ordered to withhold his or her own income in order to pay a wage assignment. Of course, proof of compliance with the court’s wage garnishment order can be more difficult in self-employed debtor cases. This is especially true where self-employed persons subject to a wage garnishment have a fluctuating income. On the other hand, anyone caught falsifying income for purposes avoiding wage garnishments, could face severe criminal penalties, including penalties for felony perjury and felony tax evasion.

Note: The process of collecting legal documents from an opposing party in a legal dispute is known as “discovery.” Family law lawyers (and judges) have experience in obtaining the true income of self-employed persons suspected of concealing income and/or assets. When a self-employed person is determined to conceal his or her true income, the discovery process will usually uncover the debtor’s deception. Once true income and/or assets are discovered, the court will likely penalize the debtor more than the court would have if the self-employed person did not otherwise attempt to conceal his or her true income and/or assets.

Special Cases: Sometimes an employee has a fluctuating income and the fluctuation is unknown to the payee (i.e. service industry tip calculation fluctuation [food server, bartender, hair dresser, etc.], open salaried employee with fluctuating work schedule, 1099 contractors who do not report employment, service for service employees, etc.). Employers that employ these types of employees should do the best they can to completely comply with the withholding order. But if the employer does not know, or reasonably could know, the exact income of his or her employee, then there is not much else that employer can do to comply with the withholding order. In these types of cases, it is up to the lawyers, and the lawyers' investigators to discover the true income of the employee.

Wage Garnishment Agreement

Parties can agree that child support or spousal support payments can be paid in some way other than through a wage garnishment. If a wage garnishment has already been ordered before the parties reached an agreement to pay support other than through a wage garnishment, then the parties can ask the court for the wage garnishment to be stayed (put on hold).

Important: If the reason a debtor cannot pay child or spousal support is due to lost employment or loss of income, the debtor should seek a downward modification of support. The debtor is responsible for the full amount of child support or spousal support until the court orders a different amount.

Note: Child support is deducted before spousal support when both child support and spousal support are subject to a wage garnishment.

When DCSS is Involved

When either the local child support agency (LCSA), or the Department of Child Support Services (DCSS) is involved in a child support case, that respective government agency usually issues a wage garnishments without considering whether or not a wage garnishment is in the payee’s best interest (as opposed to other available legal remedies).

Note: DCSS is an over-burdened, underpaid, bureaucratic, government agency with overworked and underpaid lawyers that primarily represent the government’s interest in collecting reimbursement monies from parents who should have, but failed to, provide health insurance for their child or children. DCSS almost always chooses a wage garnishment over other available legal remedies. This is true even when other legal remedies might be better for the payee (as opposed to better for the government). If possible, seek the advice of a family law attorney independent of DCSS to learn the benefits and detriments of a wage garnishments in comparison to other legal remedies.

Quashing, Canceling, or Objecting to Wage Garnishment

An employee has up to ten (10) days from the day that his or her employer received the wage garnishment (Income Withholding Order [IWO]) in which to object to the payee’s wage garnishment request. The debtor may object to a wage garnishment request under one of the following situations:

There is a prior agreement to pay spousal support directly to the payee without the need for a wage garnishment,

or all of the following apply:

The debtor made timely and full payments for at least twelve (12) months without an earnings assignment (wage garnishment) in place;

No back support is owed (arrears);

The wage garnishment would cause undue hardship; and, when child support is included, it would be in the children’s best interest to cancel the wage garnishment.

Note: Failure to pay court ordered child support or spousal support can lead to any of the following: garnished wages (earning assignment), contempt of court, modification of court orders, civil penalties (with statutory interest on arrears ranging from six (6) percent a month to ten (10) percent a year, compounded!), negative credit rating, liens on property, liens on bank accounts, liens on tax refund(s), liens on lottery winnings, suspension or revocation of a professional license (doctor, dentist, lawyer, etc.), denial of U.S. passport, and more.

To learn more about garnishing wages (earnings assignments) in child support or spousal support cases, contact our divorce and family law attorneys today for a free consultation. Our lawyers are well versed in all family law issues, including child custody, child support, child visitation (parenting time), guardianship, conservatorship, fathers’ rights, juvenile dependency hearings, child protective service (CPS) defense, annulments, grandparents’ rights, and more. Call today!

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Selected Legal References for California

Wage Garnishment Law

CCP 706.011: As used in this chapter:

(a) “Disposable earnings” means the portion of an individual’s earnings that remains after deducting all amounts required to be withheld by law.

(b) “Earnings” means compensation payable by an employer to an employee for personal services performed by such employee, whether denominated as wages, salary, commission, bonus, or otherwise.

(c) “Earnings withholding order for elder or dependent adult financial abuse” means an earnings withholding order, made pursuant to Article 5 (commencing with Section 706.100) and based on a money judgment in an action for elder or adult dependent financial abuse under Section 15657.5 of the Welfare and Institutions Code.

(d) “Earnings assignment order for support” means an order, made pursuant to Chapter 8 (commencing with Section 5200) of Part 5 of Division 9 of the Family Code or Section 3088 of the Probate Code, which requires an employer to withhold earnings for support.

(e) “Employee” means a public officer and any individual who performs services subject to the right of the employer to control both what shall be done and how it shall be done.

(f) “Employer” means a person for whom an individual performs services as an employee.

(g) “Judgment creditor,” as applied to the state, means the specific state agency seeking to collect a judgment or tax liability.

(h) “Judgment debtor” includes a person from whom the state is seeking to collect a tax liability under Article 4 (commencing with Section 706.070), whether or not a judgment has been obtained on such tax liability.

(i) “Person” includes an individual, a corporation, a partnership or other unincorporated association, a limited liability company, and a public entity.

CCP 706.020: Except for an earning assignment order for support, the earnings of an employee shall not be required to be withheld by an employer for payment of a debt by means of any judicial procedure other than pursuant to this chapter.

CCP 706.021: Notwithstanding any other provision of this title, a levy of execution upon the earnings of an employee shall be made by service of an earnings withholding order upon the employer in accordance with this chapter.

CCP 706.022(a): As used in this section, “withholding period” means the period which commences on the 10th day after service of an earnings withholding order upon the employer and which continues until the earliest of the following dates:

(1)  The date the employer has withheld the full amount required to satisfy the order.

(2) The date of termination specified in a court order served on the employer.

(3) The date of termination specified in a notice of termination served on the employer by the levying officer.

(4) The date of termination of a dormant or suspended earnings withholding order as determined pursuant to Section 706.032.

(b) Except as otherwise provided by statute, an employer shall withhold the amounts required by an earnings withholding order from all earnings of the employee payable for any pay period of the employee which ends during the withholding period.

(c) An employer is not liable for any amounts withheld and paid over to the levying officer pursuant to an earnings withholding order prior to service upon the employer pursuant to paragraph (2) or (3) of subdivision (a).

16 CFR § 444.2 - Unfair credit practices.

• Table of Popular Names

(a) In connection with the extension of credit to consumers in or affecting commerce, as commerce is defined in the Federal Trade Commission Act , it is an unfair act or practice within the meaning of Section 5 of that Act for a lender or retail installment seller directly or indirectly to take or receive from a consumer an obligation that:

(1) Constitutes or contains a cognovit or confession of judgment (for purposes other than executory process in the State of Louisiana), warrant of attorney, or other waiver of the right to notice and the opportunity to be heard in the event of suit or process thereon.

(2) Constitutes or contains an executory waiver or a limitation of exemption from attachment, execution, or other process on real or personal property held, owned by, or due to the consumer , unless the waiver applies solely to property subject to a security interest executed in connection with the obligation .

(3) Constitutes or contains an assignment of wages or other earnings unless:

(i) The assignment by its terms is revocable at the will of the debtor, or

(ii) The assignment is a payroll deduction plan or preauthorized payment plan, commencing at the time of the transaction, in which the consumer authorizes a series of wage deductions as a method of making each payment, or

(iii) The assignment applies only to wages or other earnings already earned at the time of the assignment.

(4) Constitutes or contains a nonpossessory security interest in household goods other than a purchase money security interest.

(b) [Reserved]

• Federal Trade Commission Act