Creditors and the Minimum Amount to Garnish

Title III of the Consumer Credit Protection Act (CCPA) provides a limit on the amount creditors can garnish an employee's wages. Every state has its own garnishment laws, setting forth the maximum allowable garnishment for state residents. However, states cannot impose garnishment laws that exceed the amount provided in Title III. States may set garnishment limits below the federal guidelines or set limits equal to the federal guidelines. Although state and federal garnishment laws provide the maximum amount creditors can garnish, there are no set limits regarding the minimum amount allowable.

Title III

Pursuant to Title III of the Consumer Credit Protection Act, creditors are allowed to garnish wages, "to the lesser of 25 percent of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage." The statute allows for garnishment of up to 50 percent for child support and tax liens. Title III offers protection to employees facing a first garnishment; it is illegal for employers to terminate an employee due to garnishment by one creditor. However, employers may terminate an employee if a second creditor files a garnishment claim.

Disposable Income

As Title III states, only disposable income can be garnished. Disposable income is the amount of wages left after required deductions are made. For example, if an employee has Social Security and/or state and local taxes deducted from his pay, whatever remains after those deductions are made is considered disposable income. In other words, a creditor may garnish up to 25 percent of an employee's net earnings during a given pay period; a creditor is not allowed to garnish up to 25 percent of an employee's gross earnings.

Minimum Amounts

Title III and state garnishment laws do not provide a minimum garnishment amount. Thus, if an employee owes a creditor a nominal sum, that creditor is not prohibited from attempting to collect that amount. Restrictions only apply to maximum amounts. However, employees who owe creditors nominal sums are still protected by federal and state garnishment law. For example, if an employee owes a total of $100 to a creditor, but his disposable income is less than 30 times the federal minimum wage, his wages cannot be garnished. Typically, however, creditors will not garnish wages if the debt owed is nominal, particularly if the costs of filing for garnishment exceed the amount owed.

Other Considerations

Multiple garnishments are not restricted by federal or state law. As such, an employee can be subject to more than one garnishment at the same time. However, the total amount garnished cannot exceed the federal statutory amount of 25 percent. Garnishment is on a "first file" basis, meaning each subsequent creditor must wait until the debt owed to the first garnisher is paid where multiple garnishments would exceed 25 percent. However, if the first garnisher is only taking 15 percent of an employee's disposable income, a second garnisher is allowed up to 10 percent.