If you have defaulted on debt, there is always the possibility that a creditor may take civil action against you in the courts. The options available to your creditors are limited but can nonetheless cause you considerable loss of income or wealth. Creditors can either attach to or seize your assets, or simply garnish your wages. Fortunately, Title III of the Consumer Credit Protection Act places limits on how much can be deducted from your paycheck.
Process
Though the names of the forms may differ from state to state, the essential process is the same. The creditor files suit against you in a local court and once the judgment is handed down, he begins the wage garnishment proceedings. With an order from the court, he issues a summons to your employer to withhold the maximum amount allowed by law from your paycheck. This amount is held by your employer until you go to court. Your employer must return the interrogatory document to the creditor, which shows your wages, taxes and other mandatory deductions, and the amount left, which are your non-exempt wages or disposable earnings. From this last amount the maximum percentage allowed is taken.
Federal Maximum
The maximum amount allowed by federal law is 25 percent of your disposable earnings or the amount above 30 times the federal minimum wage. If your state's minimum wage is greater than the federal minimum wage, your state's minimum wage is used. Some states have a lower maximum percentage allowed by law. In Illinois, the maximum percentage that can be deducted is 15 percent. Illinois' minimum wage is also used, because it is higher than the federal minimum wage. If the wage deduction is for child support, the deduction amount allowed by federal law increases to 50 percent of your income if you are supporting another spouse and child, and is 60 percent if you are not. This amount may also vary from state to state but cannot exceed the federal maximum.
Exempt Income
Your exempt income is any legally required deduction. State, local and federal income taxes are exempt. So are deductions for Social Security, pensions, if required by law, and other involuntary wage assignments. Union dues, 401(k) contributions, insurance and charitable contributions, for example, are not considered exempt wages.
Miscellaneous
Your employer has no choice but to respond and withhold the deduction. If your employer doesn't cooperate, he can be held liable for the entire judgment. Once your wages are held, but prior to distribution, you will have a court date. You can attempt to reduce the garnishment if you don't believe you will have enough money remaining for basic living expenses such as food, clothing and shelter. The judge will decide the outcome, but ensure that you have receipts to present to the court. The wage deduction cannot bring your weekly wage below minimum wage. It will be adjusted to ensure this. You cannot be fired if you have a wage deduction, but the Department of Labor offers no protection if you have more than one wage deduction. If multiple creditors attempt to garnish your wages, the total of the garnishments cannot exceed the single maximum allowed by state or federal law. They cannot each take 25 percent; that is the total that can be taken.
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