It’s 8 p.m. and you arrive at home after a 12-hour day at work. You’re exhausted, but feel thankful that you found a job that is putting food on the table. On your way in, you grab the mail and start flipping through the stack, when you see an envelope from the local court between the phone bill and a coupon from Bed Bath and Beyond. Your heart begins to beat faster, as thoughts of an unpaid debt rush into your head. Opening the envelope, you realize that ignoring all those legal notices brought you to this moment; the bank is garnishing your pay check.
The best way to avoid garnishment is to be pro-active and settle your debt before you are facing garnishment. If this is not possible, you have other options and rights under Federal and state law.
The good news is that both the U.S. Congress and state legislatures have enacted laws protecting some of your wages from garnishment. In reality, the banks can only have part of your cake.
Federal wage garnishment law limits the amount that the Bank can take (i.e., garnish) from your wages to 25% of your disposable earnings or the amount that your take home pay exceeds 30 times the federal minimum wage per week, whichever is less. So , if your take home pay exceeds 30 times the minimum wage, for example, with a take home pay of $500 per week, the maximum amount that that the creditor can garnish from your wages under Federal law is $125 per week ($500 times 25% equals $125 per week). $125 is the maximum amount that can be garnished because it is less than the amount by which such take home pay exceeds 30 times the minimum weekly wage.
(Calculation explained: 30 times the current Federal minimum wage ($7.25) equals $217.50. With take home income of $500 per week, your disposable earnings exceed 30 times the Federal Minimum Wage ($217.50) by $282.50, which is 56.5% of take home pay of $500 per week.)
If you are a Floridian, the news is even better. Under Florida law, the disposable earnings of what a person entitled to the “head of family” exemption are protected in various ways.
You are considered the “head of family,” under Florida law, if you provide more than 1/2 the support for a child or other dependent. A head of family is exempt from garnishment if the head’s disposable earnings are equal to or less than $750 a week. In other words, if you meet this exemption, your wages cannot be garnished. You can keep all of your wages.
For the lucky heads of family with a disposable income greater than $750 a week, your wages cannot be garnished unless you waive the head of family exemption in writing with the creditor.
If you are a head of family and your take home pay is $750 per week, you get to keep all of your wages, provided that you properly claim your exemption.
Most states use the Federal Guidelines as their standard. For example, Illinois offers no special exemptions beyond those provided to all states by Federal law. On the other hand, Illinois law does limit the amount of your earnings that can be garnished to 15% of your gross weekly wages or the amount by which your disposable earnings for a week exceed the total of 45 times the federal minimum hourly wage, whichever is greater. However, Illinois narrowly defines “disposable earnings” to the amount remaining after withholdings (such as Federal, State, and Local taxes; Social Security (FICA); required disability contributions and retirement contributions; and mandatory health insurance or union dues) are deducted from gross income.
Texas gives you a big break by not letting the creditors in the cake shop. Texans get to hang on to all of their wages because in Texas wages are not subject to garnishment by creditors. Of course, creditors can garnish your income if it is not a wage for personal services rendered. Income that is not considered a wage for personal service rendered in Texas includes capital gains on investments and business income to an owner or shareholder.
In California, 25% of your earnings are fair game for these cake-loving creditors. Also, in California the creditors can garnish bank accounts that are held jointly by people that did not incur the debt. In fact, a bank account held jointly by a married couple can be garnished without court order if proper notice is given. In other words, you need to keep a close eye on the spending habits of those that you share bank accounts with.
This is only a brief overview of garnishment. To ensure that your wages are protected, you should consult an experienced consumer protection attorney.
Authors: Marc Wites and April L. Castoro, of Wites & Rogers
