If you fall behind on loan payments, fail to pay child support or alimony or you do not pay your taxes on time, your wages may be garnished and your bank and other financial accounts frozen. Laws exist to protect you so that your creditors cannot leave you penniless and with no way to earn an income. Federal law limits the amount of your wages that can be garnished from your after-tax income.
Garnishment Basics
For your wages to be garnished, any creditors you owe money to must first obtain a court order. If your creditors are able to receive a judgment against you, they can go to your employer and demand that your employer withhold up to 25 percent of your disposable earnings -- more if the judgment is for back child support payments.
Disposable Earnings
Disposable earnings, according to the U.S. Department of Labor, represents the amount of your pay left after all legally required deductions are taken. This includes federal, state and local taxes, unemployment insurance, Social Security and contributions to state and federal employee retirement programs. In other words, the government gets to take your taxes first before your wages are garnished.
Consumer Credit Protection Act
The Consumer Credit Protection Act (CCPA) is a federal law that limits the amount of your wages that can be garnished. State law may impose further limits on creditors, but it cannot increase garnishment percentages higher than the limits imposed by the CCPA. The CCPA limits garnishment to 25 percent of your disposable income. However, if you owe money for child support, up to 60 percent of your disposable income can be garnished.
Job Protection
If your employer is forced to withhold a portion of your wages to pay your creditors, it can potentially hurt your relationship with the company you work for. The CCPA has a provision that makes it illegal for your employer to fire you because your wages have been garnished for any single indebtedness.
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