Indiana law limits the amount that a creditor can garnish (take) from your wages for repayment of debts. Prior to July 2014, Indiana law used the same wage garnishment limits found in federal wage garnishment laws (also called wage attachments). However, beginning in July 2014, Indiana provided more protection for Indiana debtors.
Read on to learn about wage garnishment law in Indiana.
What Is a Wage Garnishment?
A wage garnishment or wage attachment is an order from a court or a government agency that is sent to your employer. It requires your employer to withhold a certain amount of money from your paycheck and then send this money directly to your creditor.
Different garnishment rules apply to different types of debt -- and there are legal limits on how much of your paycheck can be garnished.
To learn more about how wage garnishments work, how to object to a wage garnishment, and more, see our Wage Garnishment and Attachment topic.
When Can a Creditor Garnish Your Wages in Indiana?
Most creditors cannot get a wage garnishment order until they have first obtained a court judgment stating that you owe the creditor money. For example, if you are behind on credit card payments or owe a doctor’s bill, those creditors cannot garnish your wages (unless they sue you and get a judgment).
However, there are a few exceptions to this rule. Your wages can be garnished without a court judgment for:
- unpaid income taxes
- court ordered child support
- child support arrears, and
- defaulted student loans.
Limits on Wage Garnishment in Indiana
There are limits to how much money can be garnished from your paycheck. The idea is that you should have enough left to pay for living expenses.
In Indiana, the law mostly tracks federal wage garnishment limits, with one exception. Here are the rules:
For any given workweek, creditors are allowed to garnish the lesser of:
- 25% of your disposable earnings, or
- the amount by which your weekly disposable earnings exceed 30 times the federal hourly minimum wage.
However, as of July 2014, if an individual shows good cause why the amount should be reduced for the first prong, the amount of garnishment could be less than 25%, as long as it is at least 10% of disposable earnings. Ind. Code Ann. § 24-4.5-5-105. This is the new part of the law -- and the part that departs from federal law. (Learn more about objecting to the wage garnishment amount.)
“Disposable earnings” are those wages left after your employer has made deductions required by law.
Example 1. Let’s assume you earn $300 per week and your net wages (disposable earnings) are $250 after all required deductions. 30 times the current federal hourly minimum wage ($7.25) is $217.50. This means that your wages can be garnished up to $62.50 (25% of $250) or $32.50 ($250 minus $217.50) per week, whichever is less. As a result, your wages may only be garnished up to $32.50 per week because that is less than $62.50.
Example 2. In the same example above, let's say you demonstrated good cause for reducing the garnishment to 10% of your wages. In this case, the most the creditor could garnish would be $30 (10% of $300).
Special Limits for Child Support, Student Loans, and Unpaid Taxes
If you owe child support, student loans, or taxes, the government or creditor can garnish your wages without getting a court judgment. The amount that can be garnished is different too.
Since 1988, all court orders for child support include an automatic income withholding order. The other parent can also get a wage garnishment order from the court if you get behind in child support payments. (To learn about income withholding orders and other ways child support can be collected, see Child Support Enforcement Obligations.)
Indiana also has the same limits as federal law on what can be taken from your paycheck for this type of wage garnishment. Up to 50% of your disposable earnings may be garnished to pay child support if you are currently supporting a spouse or a child who isn't the subject of the order. If you aren't supporting a spouse or child, up to 60% of your earnings may be taken. An additional five percent may be garnished for support payments over 12 weeks in arrears. (Learn more about wage garnishment for child support arrears.)
Student Loans in Default
If you are in default on a federal student loan, the U.S. Department of Education or any entity collecting for this agency can garnish your wages without first getting a court judgment – this is called an administrative garnishment. The most that the Department of Education can garnish is 15% of your disposable income, but not more than 30 times the minimum wage. To learn more, see the articles in Student Loan Debt.
The federal government can garnish your wages if you owe back taxes, even without a court judgment. The amount it can garnish depends on how many dependents you have and your deduction rate.
States and local governments may also be able to garnish your wages to collect unpaid state and local taxes. Contact your state labor department to find out more. (You will find a link to your state labor department below.)
Total Amount of Garnishment
If you have more than one garnishment, the total amount that can be garnished is limited to 25%. For example, if the federal government is garnishing 15% of your income to repay defaulted student loans and your employer receives a second wage garnishment order, the employer can only take another 10% of your income to send to the second creditor.
Restrictions on Job Termination Due to Wage Garnishments
Complying with wage garnishment orders can be a hassle for your employer; some might be inclined to terminate your employment rather than comply with the order. State and federal law provides some protection for you in this situation.
According to federal law, your employer cannot discharge you if you have one wage garnishment. However, federal law won’t protect you if you have more than one wage garnishment order.
In Indiana, your employer can’t discharge you because creditors are garnishing or attempting to garnish your wages regardless of how many garnishments you have.