Wage garnishment, the most common type of garnishment, is the process of deducting money from an employee's monetary compensation (including salary) as a result of a court order. Such payments are limited by federal law in the United States to 25 percent of the disposable income that the employee earns.

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. In such a case, the correct order to take a garnishment must be satisfied. 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, and garnishments for the credit card.

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 for a crime the debtor committed. Several other states observe maximum thresholds that are lower than the 25 per cent maximum provided by federal law. 

The other type of garnishment, also known as attachment, requires the garnishee to deliver all the defendant's money and/or property in the hands of the garnishee at the time of service of process to the court, to be paid over to the plaintiff. Since this type of garnishment is not continuing in nature, but is not subject to the type of restrictions that apply to wage garnishment, it is most often used against banks, or other persons or companies that incur liquidated obligations in the regular course of business.

A common method for creditors to collect money when debts become extremely delinquent is wage garnishment. In order to garnish, an unsecured creditor (one for which there is no collateral securing the debt, i.e. credit cards, personal loans, medical bills) must first sue the debtor. Typically this does not occur until the debt is around six months delinquent. The creditor sues in either small claims or civil court, depending on the size of the debt. If the outcome of the trial is in favor of the creditor, they then obtain a judgment. A judgment allows the creditor more options for debt collection.

Usually, the first collection method a creditor will use is wage garnishment. Your employer is notified by the sheriff to withhold a portion of your wages. That money is then sent to the sheriff who deducts his costs and forwards the rest to the creditor. Unsecured creditors in most parts of the country can garnish 25% of the debtor’s net pay. Net earnings are gross earnings less all mandatory deductions.

The Internal Revenue Service needn’t sue to garnish wages either. Only $116 net a week is automatically exempt from garnishment by the IRS. As with unsecured creditors, the wage withholding order provided to the employee has instructions on how to claim exemptions to possibly modify the amount garnished.

IRS Tax Levy News

In her commitment to helping taxpayers, Roni Deutch was able to stop IRS collections against Mr. James Sullivan who was barely getting by when the IRS took over a thousand dollars form his bank account. Though The Tax Lady's Firm's efforts, Mr. Sullivan was placed onto the IRS' Currently Not Collectible status. Similarly, a group of clients collectively owing the IRS over $2.8 million were ...