PDF WAGE GARNISHMENT - Public Counsel

WAGE GARNISHMENT

A Guide to Understanding Court-Ordered Wage Garnishment

and Your Options

Public Counsel 610 S. Ardmore Avenue Los Angeles, CA 90005

(213) 385-2977

2011

Table of Contents

What Is Wage Garnishment? ........................................................................................................................ 2 What Can be Garnished? .............................................................................................................................. 2 Can Public Benefits be Garnished?............................................................................................................... 2 Are There Limits to Garnishing? .................................................................................................................. 3 Owing Support vs. Garnishment ................................................................................................................... 3 How Are Multiple Debts Paid?..................................................................................................................... 4 Voluntary vs. Court-Ordered Support........................................................................................................... 4 Can I Challenge the Order of Garnishment?................................................................................................. 5 Necessaries of Life Exemption ..................................................................................................................... 5 How Do I Ask for an Exemption? ................................................................................................................ 5 Alternatives ................................................................................................................................................... 6 Appendix A: EJ155......................................................................................................7 Appendix B: EJ-160...................................................................................................................................... 9 Appendix C: WR-006 ................................................................................................................................. 10 Appendix D: WR-007 ................................................................................................................................. 11

This pamphlet discusses Wage Garnishment only. If there is a money judgment against you, it is possible that a court may order that your property, including money in your bank accounts, is taken to pay the debt. If you believe you have a court judgment against you, contact an attorney for advice.

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My Wages Are Being Garnished... Can They Do That?

What Is Wage Garnishment?

Wage garnishment is a legal process requiring an employer to withhold a portion of a person's earned wages to repay a "judgment creditor". A "judgment creditor" is someone who won a lawsuit against the employee. The employee is known as a "judgment debtor".

What Can be Garnished?

The judgment debtor's earnings can be garnished, including:

wages salary commissions bonuses periodic pension and retirement benefit payments.1

Money received through gifts, child support, life insurance proceeds2 or income tax refunds3 is not "earnings" and cannot be garnished. The law is unclear whether money earned by independent contractors is considered "earnings".4

When calculating the amount of money subject to garnishment, only "disposable earnings" are considered.5 "Disposable earnings" is the part of a person's income after deductions required by law. "Deductions required by law" include wages withheld for taxes, social security and unemployment insurance but do not include garnishments.

Can Public Benefits be Garnished?

Public benefits are generally not considered earnings, and therefore, are not subject to garnishment. 6 However, there are several exceptions to this rule.

1) Federal public benefits may be garnished to pay spousal or child support.7 2) Under California law, up to 25% of state unemployment compensation benefits and state

disability benefits may also be withheld to pay spousal or child support obligations.8 Deductions from state unemployment and disability benefits for support are automatic if requested by the local child support agency.9

1 "wages, salary, commission, bonus or otherwise and includes periodic payments pursuant to a pension or a retirement program"

15 USC ? 1672(a). 2 Life insurance proceeds: John Hancock Mut. Life Ins. Co. v. First Nat'l Bank, 393 F. Supp. 204 (1974 E.D. Tenn.) 3 Income tax refunds: Usery v. First Nat'l Bank, 586 F. 2d 107, 110 (1978). 4 CCP ? 706.01; Moses v. DeVersecy, 157 Cal. App. 3D 1071; but see In re Jones (2005, BC SD Ohio) 318 BR 841. 5 "The term "disposable earnings" means any part of the earnings of any individual remaining after the deduction from those

earnings of any amount required to be withheld by law" 15 USC ? 1672(b) 6 Note: it still may be possible for money to be recovered from bank accounts containing Federal public benefits (though there are

proposals currently being considered that would further limit creditors ability to reach such funds). 7 Federal public benefits garnished for support: 42 USC 659 and 666. 8 State unemployment for support: Cal Fam Code ? 17518. 9 Automatic state deductions for support: Ibid.

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Note: The 25% limit may be reduced either by making an agreement with the local child support agency in writing or through a court order.10

3) Other state benefits, such as welfare, may not be garnished for support. However, state benefits may be withheld if the state previously overpaid a recipient,11 or if the person receiving the benefit owes money to a state agency12 (e.g. for taxes).

Are There Limits to Garnishing?

Federal law limits how much of a person's earnings can be garnished.13 Remember, only "disposable earnings" (amount of earnings after deductions for taxes) may be garnished. Generally, garnishment orders are limited to the lesser of:

25% of a person's "disposable earning" OR The amount by which a person's "disposable earnings" for a week exceed thirty times the Federal

minimum wage.

Based on the current minimum wage, if a person's "disposable earnings" are $217.50 or less in a week, all their earnings are exempt from garnishment.

Note: These limits do not apply to child or spousal support garnishments, Chapter 13 bankruptcy debtors or to any state or federal tax debts.14

If the garnishment is for child or spousal support, up to 50-65% of "disposable earnings" can be garnished, even if the debtor earns less than $217 per week.15 Specifically, a person's disposable earnings can be garnished for child or spousal support up to a maximum of:

50%, if the person is also supporting another spouse or dependent child 55%, if the person is also supporting another spouse or dependent child AND the person owes

arrears (is overdue) on support payments 60%, if the person is not supporting another spouse or dependent child 65%, if the person is not supporting another spouse or dependent child AND the person owes

arrears (is overdue) on support payments

Note: Arrears will only raise the garnishment limits where the arrears are owed for 12 weeks or more.

Owing Support vs. Garnishment

"Owing" support is different than support being "garnished" from a person's earning. The law limits the amount of money that can be garnished from a person's income, but the law does not limit how much a person may owe. A support order can require payment of an amount more or less than the maximum (5065%) that can be garnished. If more support is owed than can be garnished, there will remain an amount owed even if there is a garnishment order, and arrears will grow.

10 Ability to reduce state deductions by agreement: Ibid. 11 Overpayment: CCP ? 706.101. 12 Withholding state benefits to pay state debt: Cal. Govt Code ? 12419.5 13 15 USC ? 1673(a).

14 Ibid. 15 15 USC ? 1673(b).

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Example: When Carl and Mary got divorced, the court ordered Carl to pay Mary $750 per week in spousal and child support payments. (This means Carl owes $750 for support). Carl earns $1000 per week and does not support any other spouse or dependent children. When Carl refuses to make support payments, Mary gets an order of garnishment from the court. Even though Carl owes $750 for support, the court can only order up to 60% of his earnings ($600) be garnished. After $600 of Carl's earnings are garnished to pay Mary, Carl will still owe the remaining $150 per week to Mary. The unpaid $150 becomes "arrears". Once the arrears accumulate for 12 weeks, Mary can have her court ordered garnishment increased to 65% of Carl's earnings.

How Are Multiple Debts Paid?

Where more than one garnishment order is issued against a person's earnings, the order with the highest priority will be paid first.16 Support orders have priority over all other orders, and current support orders have priority over delinquent support order.17 Support orders include both spousal and child support.

However, if there are multiple court orders for garnishment on one person's earnings, the total amount garnished cannot exceed the garnishment limits. If one of the garnishment orders is for support (or support arrears), the support order will be paid first. If the amount of support garnished is greater than 25% of the debtor's "disposable earnings", other garnishment orders will not be able to be enforced.18 However, if the support order is satisfied prior to the termination of the other garnishment order, that garnishment order will apply as soon as the support garnishment expires.

Voluntary vs. Court-Ordered Support

Support paid voluntarily is treated differently from state or court-ordered payments. All support payments, whether ordered or voluntary, are included as part of a person's "disposable earnings".19 Remember, only a portion of a debtor's disposable earnings can be garnished to repay judgment creditors. Although voluntarily payments do not generally count towards garnishment limits, ordered payments do.20

Therefore, no matter how much a person gives to repay a debt, if the payments are voluntary, his income may still be garnished under a court order up to the legal limits.

If an employee agrees with his employer to have amounts automatically deducted from his wages to pay support, payments are voluntary.21 Payments are considered voluntary even if paid to fulfill a courtordered divorce judgment.22 Support payments are only considered "garnishments" when the person paying them has no control over the fact that the money is withheld because the court order or a state agency requires the employer to withhold money.

Example: John earns $500 per week after deductions for taxes and social security. John's ex-wife has a court order requiring John to pay $300 per week in child support. John asks his boss to take $300 out of

16 Priority of garnishment orders: CCP ? 706.023. 17 Support orders have priority: CCP ? 706.030(c) and 706.031(b).

18 Marshall v. District Court 41b Judicial District, 444 F. Supp. 1110 (E. Dist. Mich. 1978). 19 Ibid. see also First Nat'l Bank v. Hasty, 415 F. Supp. 170 (1976, ED Mich.). 20 Ibid. 21 Bache Halsey Stuart Shields, Inc. v. Killop, 589 F. Supp. 390 (E. Dist. Mich. 1984); Western v. Hodgeson, 494 F. 2d 379, 382

(4th Cir. 1974); but see Voss Prods., Inc. v. Carlton, 147 F. Supp. 2d 892 (E.D. Tenn. 2001). 22 Carpenter v. Mumaw, 230 Wis. 2D 384 (1999); Frankel v. Frankel, 886 A. 2d 136, 155-56 (2005).

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