This article was written by Lemberg Law staff, and reviewed by Sergei Lemberg, the managing attorney of Lemberg Law.
Yes. In cases involving consumer debt (such credit cards or hospital bills), a debt collector must sue you in court and obtain a judgment against you in order to garnish your wages. In the case of student loans, you must be given 30 days written notice that your wages will be garnished.
When Can Your Wages Be Garnished?
If you’re already having a hard time making ends meet, a debt collector garnishing your wages can mean financial ruin. That’s why it’s important to understand when and how your wages can be garnished.
Typically, wage garnishment – a process whereby your employer deducts money from your paycheck and sends it to a third party – results from four types of situations:
- Owing back child support.
- Owing back taxes.
- A court judgment.
- Default on a federal student loan.
However, child support and tax issues typically aren’t handled by debt collectors.
How does a debt collector get a court judgement?
If a debt collector is unsuccessful in their attempts to collect money you owe, they may sue you for repayment. If they’re successful in their lawsuit, they will obtain a judgment against you. This judgment can then be relayed to your employer, who will then send a portion of your paycheck to the creditor.
If you have a debt in collection, it’s important to keep an eye out for court documents informing you that you are being sued. While it’s tempting to ignore debt collection correspondence, resist that temptation. If you don’t appear in court to defend yourself, chances are good that the debt collector will obtain a summary judgment against you, and that could result in wage garnishment.
However, it’s also true that debt collectors sometimes sue consumers without ever properly notifying them. Instead, they file fictitious papers with the court saying that the consumer was served. In Sykes vs. Mel S. Harris and Associates, LLC, a process serving company, a law firm, and a debt buyer were accused of conspiring to do just that. As a result, they obtained more than 100,000 default judgments against consumers. This practice is often called “gutter service” because it brings to mind throwing the notifications into the gutter instead of delivering them to the consumer as required by law.
While some debt collectors have every intention of suing a consumer in court and then garnishing their wages, others threaten to garnish a consumer’s wages but don’t or can’t follow through. This is a violation of the Fair Debt Collection Practices Act (15 U.S.C. 1692), which includes a provision prohibiting debt collectors from threatening to take actions than they cannot or do not intend to take. In Irwin vs. Mascott, Ms. Irwin alleged that the debt collector sent five letters that threatened a lawsuit. According to the judge’s ruling, one of the letters stated:
This letter will serve as formal notice pursuant to Section 1033(b) (2) of the California Code of Civil Procedure that suit may be initiated against you in the Municipal Court and that the legal action could result in a judgment against you including (in addition to the outstanding amount of the obligation) the cost of the filing fee, the cost of service of process, and when specifically allowed by law, reasonable attorneys’ fees. This judgment [may]/[will] subject you to wage garnishment(s), bank account levies, vehicle levies, and execution on your real and personal property, all at your expense.
The court ruled that the debt collector violated section 1692e(4) of the FDCPA by threatening post-judgment remedies that it didn’t intend to pursue.
If a debt collector violates the FDCPA, the consumer has the right to sue, and can recover up to $1,000 in damages, along with court costs and attorney fees.
How much of my wages can be garnished?
The federal limit for wage garnishment is 25 percent of your net wages or an amount that exceeds 30 times the federal minimum wage, whichever is less. However, the following states have more restrictive limits:
California: 25 percent of net wages or net wages that exceed 40 times the state minimum wage
Connecticut: 25 percent of net wages or net wages that exceed 40 times the state minimum wage
Florida: If your net wages are less than 30 times the federal minimum wage, your wages can’t be garnished
Illinois: 15 percent of gross wages or net wages that exceed 45 times the state minimum wage
Indiana: You can show good cause as to why the garnishment should be less than 25 percent
Iowa: Caps the amount a creditor can garnish during a calendar year based on your annual income
Maryland: Allowable amount varies by county. In Marshall vs. Safeway, the court invalidated the more restrictive county laws, which state that net pay of more than $145 per week can be garnished
Massachusetts: 15 percent of gross wages or net wages that exceed 50 times the state minimum wage
Minnesota: 25 percent of net wages or net wages that exceed 40 times the federal minimum wage
Missouri: 25 percent of net wages or 10 percent if you are head of household, or net wages that exceed 30 times the federal minimum wage
Nebraska: 25 percent of net wages or 15 percent if you are head of household, or net wages that exceed 30 times the federal minimum wage
Nevada: 25 percent of gross wages or net wages that exceed 50 times the state minimum wage
New Jersey: 10 percent if you earn up to 250 percent of the federal poverty level, or 25 percent if you earn more than 250 percent of the federal poverty level
New Mexico: 25 percent of net wages or net wages that exceed 40 times the federal minimum wage
New York: 10 or 25 percent of gross wages, whichever amount exceeds 30 percent of minimum wage, but no garnishment if net income is less than 30 times the minimum wage
North Carolina: 10 percent of gross wages, but no garnishment if net wages are less than 30 times the minimum wage
Oregon: 25 percent of net wages or the amount of net wages exceeding $218 per week
Pennsylvania: Debt collection garnishment limited to back rent and student loans
South Carolina: Debt collection garnishment limited to student loans
South Dakota: 20 percent of net wages or net wages that exceed 40 times the state minimum wage, less $25 per dependent who lives with you
Texas: Debt collection garnishment limited to student loans
Virginia: 25 percent of net wages or net wages that exceed 40 times the federal minimum wage
Washington: 25 percent of net wages or net wages less 35 times the federal minimum wage
Wisconsin: 20 percent of net wages or net wages that exceed 30 times the federal minimum wage
Wage garnishment for student loans
The U.S. Department of Education contracts with debt collection agencies, so if you have a student loan in default, a debt collector will contact you. The debt collection agencies authorized to work with the Department of Education are:
- Account Control Technology
- Action Financial Services
- Alltran Education
- Bass & Associates
- Central Research
- Coast Professional
- Credit Adjustments
- FH Cann & Associates
- FMS Investment Corp.
- GC Services
- Immediate Credit Recovery
- National Credit Services
- National Recoveries
- Pioneer Credit Recovery
- Professional Bureau of Collections of Maryland
- Reliant Capital Solutions
- Windham Professionals
The student loan debt collector is supposed to offer you a voluntary repayment agreement, but if you don’t agree to repayment or don’t make the payments, then up to 15 percent of your net pay can be garnished. However, you will be sent a notice 30 days before your wages are first garnished. It should list the amount of the debt and outline your right to see records, to object to the garnishment, and to avoid garnishment by entering into a voluntary repayment agreement.
You can also avoid wage garnishment by requesting a hearing within 30 days of receiving the notice. At the hearing, you can challenge the amount of the debt or even the existence of the debt. You can also argue that garnishment would impose an undue hardship. If you prevail, the debt may be dismissed, the garnishment may be postponed for one year, or the amount garnished may be reduced. If you don’t succeed, then the 15 percent garnishment will proceed.
While student loans are different than other types of consumer debts, the debt collection agencies hired by the U.S. Department of Education must abide by the FDCPA. If they don’t, a consumer has every right to sue the debt collector in federal and possibly state court.
Lemberg Law has a team devoted to representing people who have been harassed, threatened, deceived, or abused by debt collectors. Call 844-685-9200 and receive a free consultation, or submit our online request form.
Sykes vs. Mel S. Harris and Associates, LLC, No. 09 Civ. 8486 (S.D.N.Y.)
Irwin vs. Mascott, 112 F. Supp. 2d 937 (N.D. Cal. 2000)
Marshall vs. Safeway, 437 Md. 542 (2014)
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