If a creditor has successfully sued you to collect on a debt, the creditor can file a garnishment of your wages to collect what it is owed. Certain types of creditors can garnish your wages without securing a judgment, including the IRS, the state child support enforcement agency, and student loan providers. There are state and federal laws that limit the percentage that can be garnished from your paychecks, and the amount that can be taken will depend on the type of creditor.
Federal limits for garnishments by judgment creditors
Under federal law, judgment creditors are not allowed to garnish more than 25% of your disposable income or how much your income exceeds 30 times the minimum wage, whichever amount is less. Your disposable income is calculated by taking the required deductions out of your total amount paid. These include your state and federal taxes, Social Security, unemployment insurance taxes, and retirement deductions that are required. They do not include your voluntary deductions.
For example, imagine that you earn $1,000 per week after your required deductions have been subtracted. This means that 25% of your disposable wages is $250. Since the federal minimum wage is $7.25 per hour, 30 times that amount is $217.50. This means that your income exceeds 30 times the minimum wage by $782.50. Since this amount is more than the other amount, the most that a judgment creditor can garnish from your wages under federal law is $250 per week.
Student loan wage garnishment limits
If you have defaulted on your student loans, the U.S. Department of Education or a collection agency that is working for it is allowed to garnish up to 15% of your income to collect what you owe. You do not have to be sued for your wages to be garnished. However, you must be notified about the garnishment before it occurs.
Child and spousal support wage garnishment limits
If you owe back child support, federal law allows up to 50% of your income to be garnished if you are supporting a child who isn’t the child covered by the child support order. If you are not supporting a child or spouse, 60% of your wages can be garnished. If you are more than 12 weeks behind on your child support, an additional 5% can be garnished.
Tax debt wage garnishment limits
The IRS can garnish your wages for tax debts that you owe without a judgment and has its own limits for the amounts that it can take. The limits depend on your standard deduction and the number of dependents that you have. You will receive a notice from the IRS before it starts to garnish your wages.
New Jersey’s wage garnishment limits
Individual states can offer greater protection to debtors from wage garnishments than the federal government provides. New Jersey is one of the states that have laws with more protections. In the state, creditors can only take 10% of your disposable income if you earn less than 250% of the federal poverty limit. If you earn more than the federal poverty limit, judgment creditors can take 25% of your disposable income.
If the amount under New Jersey law that a creditor can take is less than the amount that it could take under federal law, the creditor will only be allowed to take the smaller amount.
For example, the 2019 federal poverty guideline for a family of four in the 48 contiguous states is $25,750. This means that if you have a family of four and make less than 250% of that amount, which is less than $64,375, the most a judgment creditor can withhold from your paycheck in New Jersey is 10%. If you make more than $64,375, the judgment creditor can garnish 25%.
If you have two or more garnishments, New Jersey law provides that the most that can be garnished from your check is 25%. For example, if your income exceeds 250% of the federal poverty guideline and you have a garnishment of 15% for a defaulted student loan, the most that a judgment creditor can garnish from your checks will be 10%. Because of the federal laws about child support and tax garnishments, more can be withheld from your checks for those types of debts as was previously outlined. Finally, employers are prohibited from terminating workers based on wage garnishment orders.
Get help from Swartz Swidler
If your employer has terminated you because of a wage garnishment order, you may have legal rights. Schedule an appointment with the employment lawyers at Swartz Swidler by filling out our online contact form.
