Failing to make timely payments on your debt can have serious consequences for Arkansas consumers. If you do not work with a creditor to catch up your delinquent payments, the creditor may file a lawsuit in the county where you live. Typically, a lawsuit results in a judgment, which allows the creditor to attach your wages to repay your debt. Arkansas and federal laws dictate how much of your earnings a creditor may garnish.
Minimum Wage Test
Federal law, which takes precedence over Arkansas law, mandates a minimum wage test to determine if you meet the minimum income requirements for wage garnishment. If you earn income that is less than 30 times the federal minimum wage each week, your earnings are exempt from garnishment by a private creditor. For example, if the federal minimum wage is $7.25 per hour, then you can earn up to $217.50 each week without garnishment.
Percentage Calculation
If you earn more than 30 times the federal minimum wage each week, Arkansas uses a percentage calculation mandated by the Consumer Credit Protection Act. Amounts equal to 75 percent of your post-tax earnings are exempt from garnishment, which means that a private creditor can take up to 25 percent of your earnings after tax and Social Security insurance deductions. For example, if you earn $400 per week, the creditor may take $100. Deductions not mandated by federal law, such as for retirement plan contributions and employer-sponsored health coverage, are not deducted from your gross earnings when considering the amount eligible for garnishment.
Exceptions
The federal minimum wage test and 25 percent calculation do not apply to certain types of debt. If your wages are garnished for past-due alimony or child support, different limitations apply. A creditor may take up to 50 percent of your Arkansas post-tax wages to satisfy your debt if you support another child or spouse, or 60 percent if you do not provide that type of support. Also, federal and state tax debts are not subject to garnishment limitations.
Judgment Statute of Limitations
Arkansas law places a statute of limitations on the length of time a creditor may pursue recovery of debt through wage garnishment. The creditor can garnish your wages for 10 years after it obtains a judgment against you for the debt. However, Arkansas also permits a creditor to apply for judgment renewal if you have not satisfied the debt at the end of the 10-year period. A renewal gives the creditor 10 more years to collect from you through garnishment or other collection strategies.
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