Wage Garnishment in North Carolina

In most states, if you don’t pay debts like your credit card bill, the creditor can sue you and get a judgment to garnish your wages. This allows them to take money directly from your paycheck to address the past-due debt. Luckily, North Carolina doesn't allow creditors with money judgments to garnish wages for consumer debts like credit cards and deficiency balances on auto loans. But it does allow wage garnishment for some debts. And though creditors can’t garnish your wages, they can use other collection procedures, like a bank account levy, to collect a debt in North Carolina. Still, debt collection is limited in North Carolina.

This article will explain what wage garnishment is, how it works in the Tar Heel State, and what you can do to stop it.

What Is Wage Garnishment?

Wage garnishment is a debt collection tool that allows a creditor to withhold money directly from your paycheck. It requires your employer to transfer the money they withhold to a creditor for payment of an unpaid debt. In most cases, creditors must get a judgment before they can garnish your wages. Most types of garnishment by private creditors are regulated by state rather than federal laws. 

Although there are limited exceptions, wage garnishment is not widely available as a debt collection tool for creditors in North Carolina. Unlike most other states, North Carolina law prohibits private creditors like credit card companies from collecting debts from North Carolina residents by garnishing their wages. North Carolina law prohibits North Carolina courts from issuing orders to garnish wages on behalf of any private judgment creditor.

That said, a court from another state can issue a garnishment order that’S valid under that state’s laws. When this happens, an employer in North Carolina can garnish your paycheck to repay a debt. In this case, the employer isn’t violating North Carolina law if it obeys this order. 

Who Can Garnish My Wages in North Carolina?

Most of the time private debt collectors can’t garnish wages in North Carolina even if they possess a valid judgment. Still, if a creditor or debt collector sues you, you shouldn’t ignore a lawsuit. If you do, the court can award a default judgment against you. This means you lose the case because you didn’t show up. A default judgment states that you owe a debt and will allow the creditor to pursue serious collection methods like a bank levy.

Parties may only use wage garnishment to collect the following types of debts in North Carolina:

• Unpaid income taxes owed to the federal government or the state of North Carolina,

• Debts owed to the state of North Carolina such as benefit overpayments,

• Student loans in default,

• Ambulance services,

• Garnishment orders issued in other states,

• Alimony payments, or

• Court-ordered child-support payments or past-due child support.

Federal law governs garnishment for federal income tax debts and federally guaranteed student loans. Creditors collecting these debts aren’t required to get a judgment before initiating a wage garnishment. This article’s main purpose is to explain wage garnishment for private debts where a creditor must obtain a judgment before garnishing your wages.

North Carolina Wage Garnishment Process 

If a creditor brings a debt collection lawsuit against you in North Carolina and wins a judgment, it may use a bank levy to collect a debt. A bank levy allows a creditor to withdraw funds directly from your checking or savings account. In contrast to the limits on wage garnishment in states where it’s legal, levies can continue until the judgment (including any interest and costs) is paid in full. Creditors for debts related to credit cards and car loans often use this collection tool in North Carolina since they are prohibited from collecting debts through wage garnishment. You can claim any applicable exemptions under North Carolina law when you receive notice of the writ of execution for the bank levy.

If a court from another state issues a valid order under that state’s laws requiring an employer to withhold the wages of a North Carolina employee for payment of a debt, the employer isn’t violating North Carolina law by obeying this order.

Garnishing Wages for Unpaid Taxes

In the case of unpaid taxes, a North Carolina wage garnishment requires a taxpayer’s employer to withhold funds from the taxpayer’s wages, salaries, or non-wage payments and submit those funds to the North Carolina Department of Revenue to pay the tax obligation. North Carolina doesn’t permit any creditor to deduct more than 10% of your monthly gross salaries and wages from your paychecks.

Garnishing Wages for Court-Ordered Child Support or Alimony

In North Carolina, wage garnishment can be used to collect court-ordered child support or alimony payments. Child support orders entered in North Carolina on or after January 1, 1994, generally require automatic income withholding. In these cases, the custodial parent can send a copy of the child support order to the non-custodial parent’s employer, and the employer will be required to transfer the proper amount for child support from each paycheck. 

You can file a motion for a wage garnishment order if the non-custodial parent:

• Is delinquent in making payments, 

• Owes back child support payments, or 

• Makes payment erratically. 

How Much of My Paycheck Can Be Taken by Wage Garnishment?

You can limit how much a creditor takes from your paycheck in North Carolina by using a state or federal exemption. Federal law prohibits creditors from garnishing the following:

• Social Security Retirement, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI) 

• Veterans benefits and survivor annuities

• Federal civil service retirement benefits and survivor annuities

• Railroad Retirement Act benefits 

• Longshore and harbor workers’ compensation benefits

• Merchant Seamen Protection and Relief Act benefits

• Compensation for injury/death of U.S. contractor outside the U.S.

If you have more than one garnishment or the garnishment is based on a foreign judgment, federal law limits the total garnishment amount to 25% of your weekly disposable income or the amount that your weekly disposable income exceeds 30 times the federal minimum wage (currently $7.25 per hour), whichever is less. Your disposable income is what you make after taxes and other legal deductions are taken out of your check.

Child Support 

Federal law allows up to 50% of disposable earnings to be garnished for child support if you're currently supporting another spouse or child. Up to 60% of earnings can be taken If you aren't supporting another spouse or child. An additional 5% is allowed for support payments that are over 12 weeks late. This is done through an administrative garnishment process without a court judgment.

Defaulted Student Loans 

The U.S. Department of Education or its collectors can garnish up to 15% of your disposable income. This is done through an administrative garnishment process without a court judgment.

Unpaid Taxes

The federal government and IRS may garnish wages for unpaid taxes without a court judgment. The amount the government garnishes is based on your filing status and how many dependents you have.

How To Stop a Garnishment in North Carolina

If your wages are garnished by the State of North Carolina, the U.S. government, or a party like a student loan servicer acting on the government’s behalf, you have few options. You can pay the amount owed in full or file a bankruptcy case, which will discharge your consumer debts. Consumer debts include things like credit card debt and medical bills. While this can be a helpful form of debt relief, taxes, family support obligations, and student loans can’t usually be discharged in bankruptcy. You can use North Carolina’s bankruptcy exemptions to protect your property.

You can also accept the wage garnishment and repay the debt if it doesn’t cause significant hardship. If a creditor collecting on a foreign judgment for a credit card debt, auto loan deficiency, or some other private obligation tries to garnish your wages, these debts may be discharged in Chapter 7 or Chapter 13 bankruptcy. When you file bankruptcy, the court issues an automatic stay, which stops the garnishment in most cases. Upsolve provides a free app to help you file bankruptcy.

Are There Any Resources for People Facing Wage Garnishment in North Carolina?

If you are experiencing wage garnishment, there are many self-help and legal-aid resources available in North Carolina, including the following:

• Legal Aid of North Carolina

• NC Judicial Branch

• NC Statutes

• UNC Law Library

• FAQ - Garnishment for Taxes 

• Form - Motion to Claim Exempt Property

• Form - Notice of Right to Have Exemptions Designated