garnishment business definition

Under what conditions is garnishment permitted? Are there restrictions on the part of the party seeking garnishment?

A judgment creditor (“creditor") may seek a wage deduction order known as a creditor garnishment (or garnishment for ordinary debt) to seek repayment of a debt from another individual. Garnishments can be taken for any type of debt but must be executed pursuant to the specific conditions and procedures expressly authorized by the relevant federal and state statutes.

A creditor is restricted with regard to the amount of an employee's earnings that may be garnished. Title III of the federal Consumer Credit Protection Act (CCPA) sets the maximum amount that may be garnished in any one pay period, regardless of the number of garnishment orders received by the employer. The maximum amount that may be garnished is the lesser of 25% of disposable earnings (wages left after legally required deductions have been taken) or the amount by which disposable earnings are greater than 30 times the federal minimum hourly wage. CCPA does allow a higher percentage of an employee's disposable earnings to be garnished for child support or alimony, and exempts for tax levies

Creditors may be further restricted under state garnishment laws. States are allowed to enact their own garnishment laws and if a state garnishment law differs from the CCPA, the law resulting in the smaller garnishment is followed as long as garnishment orders issued under federal authority take effect. Under this authority, states such as South Carolina and Texas limit wage garnishment for debts related to taxes, child support, federally guaranteed student loans, and court-ordered fines or restitution for a crime the debtor committed. Florida offers a significant “head of family" exemption, where the wages of a person who provides more than half the support for a child or other dependent are exempt from garnishment. In North Carolina and Pennsylvania, wages may not be garnished to pay for what the states refer to as “consumer" debt

Another constraint for creditors is the order of priority. When a state allows wage garnishments for ordinary debt, the general rule is that they are given priority on a first-in-time basis. However, the rules for priority are actually quite complex and determined by federal and state laws. When priority garnishments such as for child support or tax levies are received by the employer, they take precedence over creditor garnishments. In short, an employer is required to deduct for child support or tax levy before a garnishment for ordinary debt. If any one of these priority deductions exceeds CCPA restrictions, the employer can't withhold wages for the creditor garnishment

Wage garnishment for ordinary debt is generally determined by the laws of the state in which the debtor resides. As indicated by this answer, these laws vary greatly from state to state. An overview of each state's garnishment laws is provided at: http://www.fair-debt-collection.com/state-wage-garnishments.

Helen M. Kemp, Division Counsel and Assistant Director, Retirement and Benefit Services, Office of the State Comptroller, State of Connecticut