What Is A Wage Garnishment
Below is a MRR and PLR article in category Finance -> subcategory Other.
Understanding Wage Garnishment
Overview
Wage garnishment is a legal process where an employer withholds a portion of an employee's earnings to pay off a debt. Typically, this occurs through a court order, although it can also be initiated by government agencies like the IRS for unpaid taxes or by federal agencies for non-tax debts.
Voluntary vs. Involuntary Garnishment
It's important to differentiate between voluntary and involuntary garnishments. Some individuals may choose to have a portion of their earnings paid directly to a creditor without court intervention. In this case, it's a voluntary arrangement between the debtor and the employer.
Legal Protections and Limits
The Wage and Hour Division of the Department of Labor enforces Title III of the Consumer Credit Protection Act (CCPA). This law protects employees by limiting how much of their earnings can be garnished and by preventing job termination solely because of wage garnishment for one debt.
Title III applies across all 50 states, the District of Columbia, and U.S. territories, covering earnings such as wages, salaries, commissions, and retirement income. Employers are prohibited from firing employees if their wages are garnished for a single debt, regardless of the number of payment attempts.
Calculating Garnishable Wages
Garnishment is applied to an employee’s disposable earnings, which are the wages left after mandatory deductions like taxes and Social Security. However, deductions not required by law?"such as health insurance, retirement contributions, and union dues?"are not factored in when calculating disposable earnings under the CCPA.
Limits on Garnishment Amounts
The CCPA sets boundaries on how much can be garnished per pay period. For most debts, excluding alimony, child support, bankruptcy, or taxes, the amount taken cannot exceed 25% of the employee's disposable income or the amount by which earnings exceed 30 times the federal minimum wage. If state laws offer greater protection, the lesser garnishment applies.
Understanding these rules ensures that both employers and employees are aware of their rights and obligations regarding wage garnishment.
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