Can Creditors Garnish Paychecks?

If you've ever fallen behind on a credit card bill, you know that creditors can sometimes be relentless in their efforts to collect. In some cases, your creditor may choose to file a lawsuit against you to force you to pay. If the creditor wins, it can legally pursue garnishment of your bank account or wages. If you're facing a wage garnishment, you need to know how the process works and what your rights are.

Enforcing a Garnishment

Your creditor must initiate a civil lawsuit against you in order to seek a wage garnishment. If you fail to attend the court hearing or if you attend but are unsuccessful in defending your case, the court will enter a judgment against you. Once the judgment is recorded, the creditor must take additional action to enforce it. A separate writ of execution or writ of garnishment must be entered with the court and a copy forwarded to both you and your employer. If you raise no objection to the garnishment, your employer must begin withholding the appropriate percentage of your wages immediately.

Determining Garnishment Amount

Under federal law, the amount of your wages that may be garnished is determined by the Consumer Credit Protection Act (CCPA). As of 2011, creditors are permitted to garnish up to 25 percent of your net income each pay period or the amount by which your weekly disposable income exceeds 30 times the hourly federal minimum wage. In cases of garnishment for unpaid child support, the garnishment amount may be increased to as much as 65 percent. Under federal guidelines, your creditor must use the limitation regulation that produces the lower garnishment. If your state calculates garnishment limits using a smaller percentage, federal law requires creditors to use this figure instead.

Exempt Income

Certain types of income are exempt from wage garnishment in a creditor lawsuit. Under federal law, these include benefits paid to veterans or military survivors, federal retirement or disability pensions, retirement income from a qualified account such as an IRA or 401k, Social Security or Supplemental Security Income benefits, railroad workers retirement compensation, merchant seaman's or longshoreman's retirement benefits, student assistance, federal disaster assistance benefits and foreign service retirement and disability payments. Depending on the laws in your state, you also may be able to claim an exemption for worker's compensation, unemployment and any child support or alimony payments you receive.

Considerations

As of 2011, only four states do not permit wage garnishments for creditor lawsuits involving consumer debt. These are Texas, Pennsylvania, North Carolina and South Carolina. Garnishment for unpaid child support, alimony or taxes is permitted in all 50 states. Depending on the laws in your state, your creditor may be able to seek garnishment of your wages and seizure of assets in your bank accounts simultaneously. If you're considering filing bankruptcy to stop a garnishment order, consult a qualified bankruptcy attorney to determine whether it's an appropriate option for your situation.