Wage Garnishment Exemptions

Wage garnishment can be scary. It means some of your disposable income is taken from your paycheck or a levy is placed on your bank account to pay your creditors the money you owe them. This leaves you with less take-home income. Most, but not all creditors, are required to go to court to get a garnishment order. 

You can challenge a garnishment if you’re receiving certain types of income that are exempt from garnishment like Social Security, unemployment, and retirement benefits. To do so, you simply need to file paperwork with the clerk of the court that granted the garnishment order. It is important to know what income is exempt from being garnished for your claim of exemption. This article will discuss what happens in wage garnishment and how you can keep income from being garnished that is protected by exemptions.

What Is Wage Garnishment and When Does It Occur?

A wage garnishment allows your creditor to take money directly from your paycheck or sometimes your bank account. In most cases, a creditor must go to court and get a judgment that allows them to garnish wages for unpaid debts. The creditor that obtains a court judgment is called a judgment creditor. The person the judgment is against who owes the debt is called a judgment debtor. Creditors like hospitals, personal loan companies, or credit card companies must first have a court hearing and get a judgment before they can withhold money from your paycheck. 

If the judge grants the garnishment order, a levying officer— typically the local county sheriff—will deliver the order to your employer. Based on your state’s laws, the judgment creditor may decide to have the levying officer deliver the garnishment order to your financial institution rather than your employer. 

Whoever is served notice to surrender money—your employer or bank—to pay your debt is called a garnishee. The garnishee is a third party who withholds money from your paycheck based on the court order. They then give that money to the creditor to pay your debt. If the garnishment is delivered to your financial institution, the garnishee will take the money from your bank account to pay your debt. If the garnishment is delivered to your job, your employer is the garnishee. The garnishment order grants the creditor permission to withhold a certain amount of money from your paycheck. This is known as an earnings withholding order. 

Federal law limits the amount of money that can be garnished from your paycheck. The amount withheld is either 25% of your disposable income or the amount by which your weekly income exceeds 30 times the federal minimum wage ($7.25 per hour), whichever is less. The amount withheld from your paycheck will depend on whether your pay period is weekly or bi-weekly. 

There are important exemptions that can limit the income amount that can be garnished from your wages. There are also ways to stop wage garnishment.

What types of income are exempt from wage garnishment?

Some income is protected from wage garnishment by federal exemptions. For example, income from federal disability programs cannot be garnished. States may also protect certain income like unemployment benefits from wage garnishment. So, it is important to check your state garnishment laws. 

Generally, most types of government-provided income are exempt. These exemptions include income from the following sources: 

• Social Security benefits

• Disability benefits

• Supplemental Security Income (SSI) benefits

• Unemployment benefits

Worker’s compensation benefits, retirement income, annuities, and life insurance are also exempt from wage garnishment. Also, child support and alimony (spousal support) payments are generally exempt from wage garnishment orders. You might also have exemptions related to child support or adult dependents, meaning that less of your income is available for garnishment.

Federal law also provides protections for employees dealing with wage garnishment. Only those who earn a certain minimum weekly disposable income can have their wages garnished. Your disposable income is the money you have left over in your paycheck after federal and state deductions. These legally required deductions are federal, state, and local taxes; Social Security; Medicare; and state unemployment insurance tax

If your weekly disposable income amounts to less than 30 times $7.25 (the current federal minimum wage), then your income can’t be garnished. That means if your weekly disposable earnings are $217.50 ($7.25 hourly wage × 30) or less, the court will not grant a withholding order. 

Protecting Your Exempt Wages

It is important to know your rights when facing wage garnishment. You may have income that the law protects even if your creditor takes you to court for not paying your debt. 

Most creditors must go through a court process before they can garnish your wages. You can fight the court case by showing that you have no wages that can be garnished if your entire income falls into one or more exemptions. For example, if you are a person with a disability and all your income is from Supplemental Security Income or SSI benefits, you can show the court that your income is exempt from garnishment. To do this, you file a claim of exemption form with the clerk of the court and list your income to show that it comes from federal disability benefits. 

Similarly, if your current income comes from unemployment payments, you can list it on a claim of exemption form to protect it from the wage garnishment order. This is why it is very important that you answer any summons that you receive from the court. By answering the summons, you can tell the court your side of the story and protect any income that falls into exemptions from garnishment. 

If the garnishment has already been put in place and your employer is withholding money from your paycheck, you can still contest the order during a court hearing. You can also challenge any exempt income that is removed by a financial institution from your bank account. Whether your employer or your financial institution has a wage garnishment order, you will need to show the court which portions of your disposable earnings are exempt and why. 

If any portion of your income is exempt from the garnishment order, you should file a claim of exemption with the court clerk that issued the garnishment order and send a copy to the levying officer (sheriff) and the creditor. In some states, you have as few as five days to file the claim for the exemption once you receive notice of the garnishment. Otherwise, once your employer or financial institution receives the garnishment order, they have to surrender the money to your creditor to pay your debt.  

It’s important to note that there are two exceptions to this. If you owe the IRS for unpaid taxes, you cannot file a claim of exemption even if your income is typically exempt from a garnishment order. The IRS can also withhold money from disability benefits like Social Security. This is also true if you owe money to the Department of Education for unpaid federal student loans. These agencies do not have to go to court to garnish your wages. Once they send you notice to repay the money within a specified time period, they can ask your employer to withhold money from your paycheck. They can also levy your bank account to pay your debt. 

You have several options to avoid wage garnishment. You can seek the help of a consumer credit counseling agency to work out a payment plan with your creditors or seek legal services. Bankruptcy is also a tool that can help get rid of many debts that are causing you to fall behind on payment and leading to income garnishment. Bankruptcy can also protect income such as Social Security that is exempt from wage garnishment unless you owe the IRS or the Department of Education. A Chapter 7 bankruptcy can help you discharge many of your debts. Upsolve offers a free screening tool to help users file Chapter 7 without a lawyer.

Let’s Summarize…

Some income sources are exempt from wage garnishment. These exemptions protect certain income like Social Security or unemployment benefits from being garnished. You can work with a debt relief attorney to determine what exemptions apply to your situation. Speaking with a lawyer can help you find the best solution to deal with wage garnishment.