North Carolina is one of a handful of states to limit the types of debts that can be collected by taking funds directly out of a paycheck. Wage garnishments can be used to collect taxes, student loans, child support, alimony, and payment of ambulance services in some North Carolina counties. Money judgment debts for things like car payments, mortgages, and credit card debt aren't allowed unless the creditor obtained the money judgment in another state.
(Find out how to object to a garnishment in Wage Garnishment & Attachments.)
A wage garnishment is an order from a court or a government agency that requires your employer to withhold a certain amount of money from your paycheck for a creditor. Most creditors can't garnish your wages as soon as you fall behind on a credit card payment or medical bill. Usually, a creditor must file a collection lawsuit in court, win, and get a money judgment indicating the amount that you owe the creditor.
North Carolina is unique in that it doesn't allow a creditor with a money judgment to garnish wages. (The creditor can use other approaches, such as taking money out of a bank account. Learn about the differences between bank levies and wage garnishments.)
The only debts that North Carolina allows a creditor to collect using a wage garnishment are as follows:
(If you're unable to pay your bills, learn which debts get wiped out in Chapter 7 bankruptcy.)
Garnishments by the North Carolina Department of Revenue are limited to 10% of your gross wages.
Other garnishment percentages follow federal law and depend on the debt type. The percentage is subtracted from disposable earnings (not gross wages), which are those wages left after your employer has made deductions required by law, such as federal, state and local taxes, social security, and the employee portion of state unemployment compensation insurance. If your disposable income is less than 30 times federal minimum wage, your wages cannot be garnished at all.
Here are the federal percentages:
If you have more than one garnishment, the total garnishment amount 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 an out-of-state wage garnishment order, the employer can only take another 10% of your income to send to the second creditor.
(Learn how Chapter 13 bankruptcy can help with child support arrears, tax debt, and in some cases, student loan payments.)
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. North Carolina follows federal law, which prohibits your employer from firing you if you have one wage garnishment. However, federal law won't protect you if you have more than one wage garnishment order.
To find more information about wage garnishment limits in North Carolina, check out the North Carolina Department of Labor website.