A "wage garnishment," sometimes called a "wage attachment," is an order requiring your employer to withhold a certain amount of money from your pay and send it directly to one of your creditors. In most cases, a creditor can't garnish your wages without first getting a money judgment from a court. For instance, if you're behind on credit card payments or owe a doctor's bill, those creditors can't garnish your wages unless they sue you and get a judgment.
Some creditors, though, like those you owe taxes, federal student loans, child support, or alimony, don't have to file a suit to get a wage garnishment. These creditors have a statutory right to take money directly out of your paycheck.
But creditors can't seize all of the money in your paycheck. Different rules and legal limits determine how much of your pay can be garnished. For example, federal law places limits on how much judgment creditors can take. Some states set a lower percentage limit for how much of your wages are subject to garnishment. In some cases, Indiana wage garnishment laws provide more protection for debtors facing garnishments from judgment creditors.
The creditor will continue to garnish your wages until the debt is paid off, or you take some measure to stop the garnishment, such as claiming an exemption with the court. Your state's exemption laws determine the amount of income you'll be able to retain. Depending on your situation, you might be able to partially or fully keep your money. You can also potentially stop most garnishments by filing for bankruptcy.
Generally, any of your creditors might be able to garnish your wages. Again, some creditors must first get a judgment and court order before garnishing wages. Other creditors don't need a court order.
The most common types of debt that may be garnished from your wages include:
Under federal law, the garnishment amount for judgment creditors is limited to 25% of your disposable earnings for that week (what's left after mandatory deductions) or the amount by which your disposable earnings for that week exceed 30 times the federal minimum hourly wage, whichever is less. (15 U.S.C. § 1673).
Indiana's wage garnishment laws are located in Title 24, Article 4.5, Chapter 5 of the Indiana Code.
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:
But if you can show good cause why the amount should be reduced to less than 25%, the amount of garnishment could be less, as long as it is at least 10% of your disposable earnings. (Ind. Code § 24-4.5-5-105).
"Disposable earnings" are those wages left after your employer has made deductions required by law. (Ind. Code § 24-4.5-5-105).
In addition to wage garnishment, another way to garnish money is by levying a bank account, subject to some exemptions. Certain money in your bank account is protected from this type of garnishment, for example, two months' worth of certain federal benefits, such as Social Security.
If your federal benefits are directly deposited to a bank account or loaded onto a prepaid card, these benefits are automatically protected from garnishment. But if you get your benefits by check and deposit them, the bank won't automatically protect this money. You'll have to go to court to prove the money comes from protected benefits.
So, credit card companies, medical services providers, and other commercial creditors generally can't garnish Social Security and other federal benefits. However, the federal government can garnish some kinds of federal benefits, like Social Security and Social Security Disability Insurance (SSDI), to recover some debts, such as back taxes or defaulted student loan payments.
If you owe child support, federal student loans, or taxes, the government or creditor can garnish your wages without getting a court judgment for that purpose. The amount that can be garnished is different than it is for judgment creditors, 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.
Federal law limits this type of wage garnishment. Up to 50% of your disposable earnings may be garnished to pay child support if you're 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 5% may be taken if you're more than 12 weeks in arrears. (15 U.S.C. § 1673).
Indiana has the same limits as federal law on what can be taken from your paycheck for this type of wage garnishment. (Ind. Code § 24-4.5-5-105).
If you're in default on a federal student loan, the U.S. Department of Education or any entity collecting for this agency can garnish up to 15% of your pay. (20 U.S.C. § 1095a(a)(1)). This kind of garnishment is called an "administrative garnishment."
But you can keep an amount that's equivalent to 30 times the current federal minimum wage per week. (Remember, federal law protects the level of income equal to 30 times the minimum wage per week from garnishment.) (15 U.S.C. § 1673).
The federal government can garnish your wages (called a "levy") if you owe back taxes, even without a court judgment. The weekly exempt amount is based on the total of the taxpayer's standard deduction and the aggregate amount of the deductions for personal exemptions allowed the taxpayer in the taxable year in which such levy occurs. Then, this total is divided by 52. If you don't verify the standard deduction and how many dependents you would be entitled to claim on your tax return, the IRS bases the amount exempt from levy on the standard deduction for a married person filing separately, with only one personal exemption. (26 U.S.C. § 6334(d)).
States and local governments might also be able to garnish your wages to collect unpaid state and local taxes. Contact your state labor department to find out more.
Complying with wage garnishment orders can be a hassle for your employer; some might prefer to terminate your employment rather than comply. Federal law provides some protection for you in this situation. Under federal law, your employer can't discharge you if you have one wage garnishment. (15 U.S.C. § 1674).
Some states provide more protection. 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. (Ind. Code § 24-4.5-5-106).
Depending on your situation, you might be able to partially or fully keep your money by claiming exemptions under state law. You can also potentially stop most garnishments by filing for bankruptcy.
And, depending on the type of debt that's being garnished, you might have other options. For example, if the IRS is garnishing your wages because of overdue taxes, you can make a settlement offer (an "offer in compromise") or set up a payment plan.
The most obvious consequence of a wage garnishment is a reduction in your take-home pay. A smaller paycheck can affect your ability to cover basic living expenses, potentially leading to difficulties paying your monthly bills.
Also, while a wage garnishment won't appear on your credit reports, creditors do report delinquent debt to the credit reporting agencies. And the reports can include information about how the debt is being collected, including through a wage garnishment. The missed payments culminating in a wage garnishment and other negative information will generally stay on your credit reports for seven years, affecting your future financial opportunities and potentially hindering your efforts to rebuild your credit.
Beyond the financial strain, the emotional consequences of wage garnishment can be taxing. Knowing that some of your earnings will be garnished can lead to stress and anxiety. Seeking advice from a lawyer and exploring ways to resolve the underlying debt or work out payment terms can lessen some of these pressures.
If you receive a notice of a wage garnishment order, you might be able to protect (exempt) some or all of your wages by filing an exemption claim with the court or raising an objection. The procedures you need to follow to object to a wage garnishment depend on the type of debt that the creditor is trying to collect, as well as the laws of your state. But usually, you must act quickly. File the required form as soon as possible. You might have to go to a hearing, but if you win, a judge might eliminate or reduce the garnishment.
Again, you can often stop garnishments by filing for bankruptcy. Your state's exemption laws determine the amount of income you'll be able to keep.
Talk to a lawyer to learn more about how you can protect your wages.
Learn about wage garnishments for credit card debt.
Find out if a mortgage company can garnish your wages after foreclosure.
Get information about when a creditor will stop garnishing wages.
This article provides an overview of Indiana's wage garnishment laws. You can find more information on garnishment in general at the U.S. Department of Labor website. For more information on wage garnishment in Indiana, visit the Indiana Legal Services website.
For information specific to your situation or to get help objecting to a garnishment, contact a local debt relief attorney.