The Difference Between Income Deduction Orders & Wage Garnishment

If you fall behind on your financial obligations, your creditors might 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 might not be subject to federal or state wage garnishment limits.

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 general requirement 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 are sometimes 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.

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).

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 might 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 their paycheck.

Court orders in Chapter 13 bankruptcy cases aren't 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 aren't behind on your obligations.