When you're trying to stretch your paycheck from week to week, wage garnishment can feel like an impossible hurdle.
Garnishment happens when you owe money for something pertaining to the government or legal matters. This is different from the amount that's voluntarily taken out of your paycheck for regular taxes.
It might seem rough to take home less money than you're used to, but you do have rights. With some basic knowledge of the system and its limits, you'll be able to protect yourself against unfair wage garnishment.
We'll walk you through what you need to know:
What Are the Limits of Wage Garnishment?
Some limits aren't like the others, and we'll get to those special cases in the last section. For now, let's take a look at wage garnishment for general situations, like a defaulted SBA loan.
In general, the maximum limits for wage garnishment depend on the federal minimum wage, which is currently $7.25. Even if your state minimum wage is higher, the limits will be the same throughout the country.
To learn how much you might have to pay in wage garnishments, you'll need to compare the amount in your paycheck to some multiples of the minimum wage. Confused? Don't worry—we'll do the math for you.
Paying 25 Percent
The method to determine your wage garnishment limit will depend on how much money you make a week. In general, people who make more money will pay 15 percent of their disposable earnings, and here's why:
Let's say you make $300 in disposable earnings every week. 15 percent of that would be $45. Using the other possible method, the difference between 30 times the minimum wage—which would be $217.50—and the amount in your paycheck would be $82.50.
The wage garnishment level is always the smaller amount from these two methods of calculation. When you make at least a certain amount per week (currently $290, based on a minimum wage of $7.25), the 15 percent method will always give you a lower number than the other method.
Long story short, if you get $290 or more a week, and the minimum wage is still $7.25, the most you'd need to pay in wage garnishment would be 15 percent of your disposable earnings.
Paying Everything Above a Certain Amount
If you make less than $290 a week, and the minimum wage is still $7.25, then your maximum limit will be based on the other method.
First, you'll need to know how much 30 times the minimum wage is. Right now, it's $217.50. Then you just need to subtract that from your weekly disposable earnings to figure out the most you'd need to pay in wage garnishment.
The idea here is that, no matter how much wage garnishment takes from you, you'll still take home at least $217.50 a week. This doesn't apply to all cases, though, as you'll read later on.
Not Paying At All
In general, if you make less than $217.50 a week, or 30 times the federal minimum wage if that has changed by the time you're reading this, then you won't have to face wage garnishment at all.
What's at Stake?
Although the term is wage garnishment, the practice applies to any kind of disposable earnings you have.
The good news for you is that disposable earnings are calculated after regular tax deductions, both state and federal. But what you'll have to watch out for is that 'disposable earnings' may cover things you never realized.
For example, your earnings will include commissions, sign-on bonuses, and severance pay. Make sure you consider all your earnings to figure out how you'll need to calculate the limit the government may take.
For those out there who think best with examples, we've put together a few hypothetical situations to describe how wage garnishment applies to each. If you find yourself in similar scenarios, talk to your lawyer to figure out your individual details.
We're living in a time when many people are not making as much money as they used to, and some are even out of a job due to the pandemic.
If this sounds like your situation, you might be able to schedule a review to modify the amount. This is because if your earnings have decreased, the amount of money you lose could cause financial hardship.
But what if the hearing officer has already denied your financial hardship claim earlier in the year? Well, when circumstances change, you have the right to a reassessment.
If you're trying to show that there's been a change in your financial situation, you'll need to provide documents or other evidence of what changed. For example, if your job has started paying you less due to the effects of COVID-19, you can bring documentation of this to a new assessment of your case.
And if the evidence checks out, you'll have the right to a reduced or eliminated wage garnishment.
More Than One Debt
If you're facing wage garnishment for multiple debts, you should know how much these are adding up.
The wage garnishment limit for your disposable earnings level is a combined limit. If you're already paying the maximum general limit for one debt—let's say, back taxes—then you shouldn't have to undergo wage garnishment for another one, like student loan debt. The maximum amount you face with a federal administrative wage garnishment plus other garnishments is 25%.
Know Your Rights
It might seem hard to navigate administrative wage garnishment processes, but with a little bit of calculation, you'll be able to take charge. If you think you may be undergoing a wage garnishment that's higher than your legal limits, bring this up with your lawyer and see if you can get a hearing to correct the situation.
And if you'd like a free case evaluation, just let us know. We'll work with you to protect your rights.