Garnished Wages

What It Means

Garnished wages (wages being the monetary compensation paid to an employee) are wages that are deducted from an employee’s regular paycheck in order to pay off a debt (or in some cases debts) incurred by that employee. Debt refers to money that one party (such as an individual, a company, or another entity) owes to another party. To pay a debt is also referred to as satisfying a debt. The party that owes the money is known as the debtor, while the party to whom the money is owed is called a creditor. The practice of taking possession of a debtor’s wages is commonly known as garnishment.

Situations involving the garnishment of a debtor’s wages always involve three parties: the creditor, the debtor, and the person or entity who has control over the debtor’s wages (typically the debtor’s employer), also known as the garnishee. Situations involving wage garnishment are usually the result of a legal action, in which the creditor (known within the context of the legal action as the plaintiff) files a lawsuit (an action taken in a court of law to resolve a dispute, in this case over the repayment of a debt) against the debtor (or defendant) to obtain the money that is owed. If a court decides in favor of the plaintiff, then it will order that the garnishee retain a portion of the defendant’s wages, which is then paid to the creditor. The court’s decision is known as the judgment, while the order is commonly referred to as a court order. The debtor never actually receives the wages that are garnished but rather a reduced paycheck that reflects the deduction of a percentage of his or her wages. Wage garnishment is typically the final recourse taken in situations involving the satisfaction of a debt, after the creditor has exhausted all other alternatives (for example, presenting the debtor with a bill for the debt or contacting the debtor to request repayment of the debt).

When Did It Begin

Wage garnishment traces its origins to the legal code of ancient Rome, which gave judges the power to order a debtor’s employer to cooperate with creditors in ensuring that his or her debts were repaid. This method of debt collection became standard practice in Europe during the Middle Ages (a historical period roughly extending from the fifth century through the fifteenth century). Eventually wage garnishment procedures fell under the jurisdiction of English common law. Broadly speaking common law is a legal code based on custom, as opposed to a legal system based on the official passage of laws (also known as statutory law). Over time common law is reinforced through the standard practices of society and by the court rulings of judges. These court rulings, which play a significant role in determining future court rulings concerning the same legal issue, are also known as legal precedent.

In the United States wage garnishment procedures date to the colonial era (a historical period from the early seventeenth century into the mid-eighteenth century when England had colonial settlements in America) and were inherited directly from English common law. Following American independence (the Declaration of Independence was passed on July 4, 1776) individual states developed their own legal precedents concerning the garnishment of a debtor’s wages. The laws derived from these precedents became increasingly particular over time and varied from state to state. During the nineteenth century, for example, the state of Missouri prohibited the garnishment of wages in cases where the debtor was the head of a household (in other words responsible for the care of dependent children, minors, or other individuals). The first federal law in the United States to specifically regulate wage garnishment was the Consumer Credit Protection Act, or CCPA. Passed on May 29, 1968, the CCPA instituted several legal restrictions designed to protect the debtor from undue hardship in the repayment of a debt through garnished wages. One significant provision of the CCPA established that a maximum of 25 percent of a debtor’s disposable income (income after the deduction of taxes) was subject to garnishment. Since then a number of state laws have set the percentage of income subject to garnishment at rates that are lower than the federal maximum. Other states have passed laws exempting certain necessary expenses (for example, medical costs) from being factored into a debtor’s garnished wages. In Florida a parent who pays more than 50 percent of the money toward the support of a child is not subject to wage garnishment.

More Detailed Information

Wage garnishment is similar in principle to other methods of taking possession of a debtor’s assets (in other words items of value owned by the debtor) to satisfy a debt. One of these other methods is known as a lien. A lien enables a creditor to seize a piece of property owned by the debtor in situations when the debtor fails to repay a debt. Another method, known as an attachment, allows the creditor to seize a debtor’s property in anticipation of a favorable ruling in a legal action. An attachment is generally ordered by a court when it deems that the creditor has a strong case against the debtor. Wage garnishment differs from these forms of debt satisfaction in two significant respects. For one, wage garnishment always involves the debtor’s income rather than a piece of material property (such as a car or a home). At the same time, wage garnishment gives a creditor a right to claim a debtor’s future earnings until the entire debt is repaid.

A number of debt situations require the garnishment of an employee’s wages. These include the payment of child support (money a divorced parent must pay toward the support of his or her children), tax debt (unpaid taxes), money due to a court in unpaid fines, and other debts deemed subject to wage garnishment by a court judgment. These other debts can range from money owed to an electrician for rewiring a house to unpaid credit card debts. In cases where a debtor owes more than one debt, federal law mandates that certain debts receive a higher priority than others. For example, the debt with the highest priority is unpaid federal tax; other taxes (for example, state or city) are the next highest priority, followed by other debts (such as credit card debts). Some states prohibit the garnishment of wages except for certain debts; for example, Pennsylvania law allows wage garnishment only in cases involving unpaid taxes, child support, federal student loans, and court fines and other forms of restitution related to a criminal act.

Recent Trends

In the United States the practice of garnishing employee wages became more widespread following the passage of the Bankruptcy Abuse and Consumer Protection Act of October 2005. Under this law debtors wishing to file for bankruptcy (a process by which a debtor who is deemed unable to pay off all his or her debts seeks legal protection from his or her creditors) became subject to stricter rules concerning the settlement of past debts. In the past most debtors filing for bankruptcy could escape all responsibility for repaying former debts; under the new law, however, debtors were compelled to agree to a strict five-year repayment program to satisfy as many outstanding debts as possible. As a result the number of debtors subject to wage garnishment rose significantly.