One collection method that creditors can use is the garnishment of wages. This is when money is withheld by an individual’s employer to pay back the individual’s debt. The wages subject to garnishment will be turned over to the levying officer (usually the sheriff) who turns the funds over to the creditor.
Usually, a creditor must first sue the individual in state court and obtain a judgment. Once the creditor has a judgment the creditor can apply to the court for permission to garnish the individual’s wages. This is not true for all creditors. Some creditors such as the IRS can garnish an individual’s wages without first initiating a lawsuit and obtaining a judgment.
Once the creditor gets permission from the court to garnish the individual’s wages an earnings withholding order is served upon the employer. The employer is instructed to give the employee 10 days notice of the garnishment. The employee’s wages can be withheld 10 calendar days after service is effected on the employer.
The maximum withholding is 25% of the individual’s disposable earnings (in some instances the maximum withholding will be lower than 25% -- see our article Blueprint of a Garnishment in California for more detail). This is true even if more than one creditor is attempting to garnish the individual.
If the garnishment is for spousal or child support the amount garnished can range from 50% to 65% of the individuals earnings.
Some earnings are exempt from garnishment through action of the individual (application for exemption through the court) or through the nature of the funds (such as social security or veterans benefits).
Bankruptcy can help stop a garnishment (for most types of debts). Once the case is filed the automatic stay comes into play and acts as a shield to protect the individual from collection attempts by creditors (including garnishments). Any funds garnished after a bankruptcy case is filed must be returned to the debtor, as the garnishment violated the federal bankruptcy law.