If you fall behind on your financial obligations, your creditors may be able to garnish your wages to collect their debts. Income deduction orders are closely related to wage garnishment. However, they are generally issued in more limited circumstances and may not be subject to federal or state wage garnishment limits. Read on to learn more about the differences between income deduction orders and wage garnishment.
What Is a Wage Garnishment?
A wage garnishment or wage attachment is an order issued by a court or a government agency that directs your employer to deduct a certain amount of money from your paycheck and send it to a creditor. Usually, a creditor must have a judgment against you before it can garnish your wages. There are a few exceptions to this though.
Wage Garnishment Limits
Federal and state law places limits on how much of your wages may be garnished to satisfy creditors. Wage garnishment limits depend on where you live, how much money you make, and what type of debt the garnishment is for.
For most types of debt, federal law limits wage garnishments to the lesser of:
- 25% of your disposable earnings (wages left after deductions required by law), or
- the amount by which your weekly disposable earnings exceed 30 times the Federal hourly minimum wage.
However, states my be more restrictive as to how much creditors can garnish. And wage garnishment limits may be higher for certain types of debt such as child support, alimony, and unpaid taxes.
Visit our Wage Garnishment & Wage Attachment area to learn more about when creditors can garnish your wages, limits for special types of debts, and the wage garnishment limits in your state.
What Is an Income Deduction Order?
Similar to a wage garnishment order, an income deduction order requires your employer to withhold a certain amount of money from your wages to satisfy your financial obligations. Income deduction orders are commonly used in Chapter 13 bankruptcy cases and to satisfy child support obligations (currently all court orders for child support include an automatic income deduction order).
Learn more about automatic income deduction for ongoing child support payments. To learn about withholding wages for Chapter 13, visit our Chapter 13 Bankruptcy area.
Differences Between Income Deduction Orders and Wage Garnishment
Here are some of the main differences between income deduction orders and wage garnishment.
Income Deduction Orders Are Issued in Limited Circumstances
As discussed, income deduction orders are most commonly issued in child support or bankruptcy cases. Some states even have restrictions on which courts are allowed to issue income deduction orders. In contrast, wage garnishment is used to satisfy most other types of debt.
Income Deduction Orders May Not Be Subject to Wage Garnishment Limits
Under certain circumstances, income deduction orders may not be subject to federal or state wage garnishment limits. The most common example of this is an income deduction order issued in a Chapter 13 bankruptcy to deduct the debtor’s monthly plan payments from his or her paycheck.
Court orders in Chapter 13 bankruptcy cases are not subject to wage garnishment limits. So if the bankruptcy court sends an income deduction order to your employer, it must deduct your plan payment from your paycheck even if the deduction exceeds federal or state wage garnishment limits.
Income Deduction Orders May Be Issued Even if You Are Not Behind on Payments
Generally, wage garnishments are used to satisfy outstanding judgments or other debts you are behind on. In contrast, an income deduction order may be issued automatically to deduct your ongoing child support or Chapter 13 bankruptcy payments even if you are not behind on your obligations.
You can learn more about how creditors can collect debts from you in our Repossession, Wage Garnishments & Bank Levies area.