Federal law limits the amount that a creditor can seize or "garnish" from your wages for repayment of debts. North Carolina wage garnishment laws are even stricter than federal wage garnishment laws. In North Carolina, wage garnishments are only permitted under very limited circumstances. Under the current law, wage garnishments by judgment creditors in North Carolina are generally not allowed.
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.
In most states, 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:
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.
Federal law places limits on wage garnishment amounts. However, North Carolina imposes even stricter limits. North Carolina courts are prohibited from issuing orders which direct an employer to withhold a portion of your wages to pay a judgment creditor. Garnishments are permitted for taxes, student loan debt, child support, alimony, overpayment of unemployment benefits, and charges for ambulance services in some North Carolina counties.
It also may be possible for a creditor holding a judgment from a state other than North Carolina to enforce its out-of-state garnishment in North Carolina. While it is not a violation of North Carolina law for an employer to abide by an out-of-state garnishment, some lawyers in North Carolina dispute the validity of these orders.
If an out-of-state creditor is allowed to garnish your wages in North Carolina, the garnishment would be subject to limits set by federal law.
A creditor can garnish 25% of your disposable income or the amount by which your disposable income exceeds 30 times federal minimum wage, whichever is less. In North Carolina, if your disposable income is less than 30 times federal minimum wage, your wages cannot be garnished at all.
"Disposable earnings" are those wages left after your employer has made deductions required by law. Examples of legally required deductions are federal, state and local taxes, social security, and the employee portion of state unemployment compensation insurance. Deductions that are not required by law do not count to reduce your disposable income. These include union dues, life and health insurance, and most retirement plan contributions.
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.)
Federal law limits 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.)
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.)
Under North Carolina law, garnishments by the North Carolina Department of Revenue are limited to 10% of your gross wages.
If you have more than one garnishment, the total amount that can be garnished is limited to 25% of your disposable income under federal law. 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.
If your wages are being garnished by the North Carolina Department of Revenue, the garnishment is limited to 10% of your gross wages.
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.
Some states offer more protection for debtors. Federal law controls in North Carolina.
To find more information about wage garnishment limits in North Carolina, check out the website of the North Carolina Department of Labor at http://www.nclabor.com.