Garnishment is a process through which a monetary judgment against the defendant is collected. This is done by giving a court order to the garnishee or the third party for a payback that is primarily owed to the defendant, directly to the complainant. This could be really tricky, as the federal law of a jurisdiction allows for the collection, without any court order. In simple terms, a person is asked through a legal channel to pay back the debt, any taxes, or pending payments.
In the Federal Law, amongst all, wage garnishment is the most common type. So, the judgment entails the procedure of withholding an amount or deducting the same from an employee's salary because of a court order. This is called Writ of Garnishment. Some of these have a federal restriction that only 25% of the disposable income of an individual is liable for deduction. This lasts till the person pays back the entire amount.
Normally, any type of debt qualifies for it, but the most common debts where it is ordered are:
- Defaulted student loans
- Unpaid court fines
- Child support
- Any other type of monetary judgment
There are cases where a person has to pay multiple debts at multiple levels and does not have enough money to satisfy all the garnishments. Then, in this case, the priority should be decided based on the level of taxes. For instance, if a person has a federal, local, and a credit card one, the first would obviously be the federal one and the others would follow. Consequently, employers get a legal notice to hold back a certain amount of the particular employee's salary for payback, and this procedure cannot be refused by the concerned person.
Comparison with Attachment or Attachment of Earnings
This is also a type of garnishment. This is a civil litigation, where the defendant's wages are held as payment for the debt, ensuing from a court order. However, the difference between the two types is that this attachment is not liable to stringent restrictions. It is mainly used against banks or individuals or firms, which get liquidated obligations in the routine business course. This applies to the time following the pay period and not before that.
Federal Restrictions and Requirements
Before the Federal Internal Revenue Services (IRS) commences or announces a wage garnishment, here are a few things that should be considered under the US Federal Tax rules.
- The debtor or taxpayer should have refused or ignored the payment of tax within the stipulated time.
- The IRS should have thoroughly assessed the tax and should have sent a written notice and demand for payment.
- A garnishment is a kind of levy, so no court order is needed. However, the IRS must send a final "Notice of Intent to Levy" and "Notice of Your Right to a Hearing", a minimum of 30 days prior to the levy.
The Federal Consumer Credit Protection Act (CCPA) lays down the employee's rights and the details of circumstances where the wage garnishment applies. The title 3 or chapter 3 of this act is applicable to all employers and individuals receiving earnings on account of personal services, comprising salaries, wages, bonuses, pensions, etc.
The rights of the employees, according to this act include:
- A minimum partial compensation for the personal services they cater to in spite of the garnishment.
- An employer is not allowed to discharge an employee legally because of that person's indebtedness, leading to garnishment of wages.
- This chapter 3 covers the employees by laying a rule that limits the amount of disposable earnings liable to garnishment in any pay period to less than 25%.
- If these laws or rights are violated by the employer, then he/she will need to pay back the wages, reinstate the employee if he or she is discharged, and restore the unlawfully garnished amount by him.
However, these restrictions are null and void in case of bankruptcy court orders and debts to be paid for federal and state taxes. All these things are enforced and administered by the Wage and Hour Division of the Employment Standards Administration.
What matters is the fact that it is better to avoid being under any sort of debt because you do not want creditors threatening you with this legal order. The best way is to avoid it by ensuring that your fiscal health is perfect.