A garnishment is a means of collecting a monetary judgment against a defendant by ordering a third party (the garnishee) to pay money, otherwise owed to the defendant, directly to the plaintiff. In the case of collecting for taxes, the law of a jurisdiction may allow for collection without a judgment or other court order.
Wage garnishment, the most common type of garnishment, is the process of deducting money from an employee’s monetary compensation (including salary), sometimes as a result of a court order. Wage garnishments continue until the entire debt is paid or arrangements are made to pay off the debt. Garnishments can be taken for any type of debt but common examples of debt that result in garnishments include:
defaulted student loans
unpaid court fines
When served on an employer, garnishments are taken as part of the payroll process. When processing payroll, sometimes there is not enough money in the employee’s net pay to satisfy all of the garnishments. For example, in a case with federal tax, local tax, and credit card garnishments, the first garnishment taken would be the federal tax garnishments, then the local tax garnishments, and finally, garnishments for the credit card. Employers receive a notice telling them to withhold a certain amount of their employee’s wages for payment and cannot refuse to garnish wages.
Wage garnishment can negatively affect credit, reputation, and the ability to receive a loan or open a bank account.
At present four U.S. states — North Carolina, Pennsylvania, South Carolina and Texas — do not allow wage garnishment at all except for debts related to taxes, child support, federally guaranteed student loans, and court-ordered fines or restitution. Several other states observe maximum thresholds that are lower than the 25 percent maximum provided by federal law. States may also prohibit garnishment altogether in certain circumstances. For example, in Florida the wages of a person who provides more than half the support for a child or other dependent are exempt from garnishment altogether (though this is subject to waiver). Loans and negotiations with creditors can also help debtors to avoid wage garnishment.
In many states when the person is an employee or appointee of a governmental unit the writ is called a Writ of Sequestration. These are processed by the courts in the same manner as garnishments and are subject to the same wage exemptions.
In the United States, firing an employee to avoid handling a levy may be a criminal offense. Federal law provides for a fine of up to $1,000 and imprisonment for up to one year on an employer who willfully fires an employee in connection with a garnishment of the employee’s earnings.