Garnishment
Encyclopedia
A garnishment is a means of collecting a monetary judgment against a defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...

 by ordering a third party (the garnishee) to pay money, otherwise owed to the defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...

, directly to the plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...

. In the case of collecting for taxes, the law of a jurisdiction may allow for collection without a judgment or other court order.

Wage garnishment

Wage garnishment, the most common type of garnishment, is the process of deducting money from an employee's monetary compensation (including salary
Salary
A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis....

), sometimes as a result of a court order
Court order
A court order is an official proclamation by a judge that defines the legal relationships between the parties to a hearing, a trial, an appeal or other court proceedings. Such ruling requires or authorizes the carrying out of certain steps by one or more parties to a case...

. Wage garnishments continue until the entire debt is paid or arrangements are made to pay off the debt. Garnishments can be taken for any type of debt but common examples of debt that result in garnishments include:
  • child support
    Child support
    In family law and public policy, child support is an ongoing, periodic payment made by a parent for the financial benefit of a child following the end of a marriage or other relationship...

  • defaulted student loans
    Student loans in the United States
    While included in the term "financial aid," higher education loans differ from scholarships and grants in that they must be paid back. They come in several varieties in the United States:...

  • tax
    Tax
    To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

    es
  • unpaid court fines
    Court costs
    Court costs are the costs of handling a case, which, depending on legal rules, may or may not include the costs of the various parties in a lawsuit in addition to the costs of the court itself. Court costs can reach very high amounts, often far beyond the actual monetary worth of a case...


When served on an employer, garnishments are taken as part of the payroll
Payroll
In a company, payroll is the sum of all financial records of salaries for an employee, wages, bonuses and deductions. In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time. Payroll plays a major role in a company for several reasons...

 process. When processing payroll, sometimes there is not enough money in the employee's net pay
Net pay
Net pay is the remaining amount after deductions from the gross salary, where net means ultimate.Example deductions: income taxes, trade union dues, it mean authorized deduction for a retirement...

 to satisfy all of the garnishments. For example, in a case with federal tax, local tax, and credit card garnishments, the first garnishment taken would be the federal tax garnishments, then the local tax garnishments, and finally, garnishments for the credit card. Employers receive a notice telling them to withhold a certain amount of their employee's wages for payment and cannot refuse to garnish wages.

Wage garnishment can negatively affect credit, reputation, and the ability to receive a loan or open a bank account.

At present four U.S. states — North Carolina
North Carolina
North Carolina is a state located in the southeastern United States. The state borders South Carolina and Georgia to the south, Tennessee to the west and Virginia to the north. North Carolina contains 100 counties. Its capital is Raleigh, and its largest city is Charlotte...

, Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...

, South Carolina
South Carolina
South Carolina is a state in the Deep South of the United States that borders Georgia to the south, North Carolina to the north, and the Atlantic Ocean to the east. Originally part of the Province of Carolina, the Province of South Carolina was one of the 13 colonies that declared independence...

 and Texas
Texas
Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...

 — do not allow wage garnishment at all except for debts related to taxes, child support, federally guaranteed student loans, and court-ordered fines or restitution. The federal garnishment limit (with some exceptions like child support and student loans) on a weekly basis is the lower of (A) 25% of your disposable earnings (what's left after mandatory tax deductions), or (B) the total amount by which your weekly wage exceeds 30 times the federal hourly minimum wage. For details, click here, and for an example click here. Several other states observe maximum thresholds that are lower than the maximums provided by federal law. States may also prohibit garnishment altogether in certain circumstances. For example, in Florida
Florida
Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...

 the wages of a person who provides more than half the support for a child or other dependent are exempt from garnishment altogether (though this is subject to waiver
Waiver
A waiver is the voluntary relinquishment or surrender of some known right or privilege.While a waiver is often in writing, sometimes a person's actions can act as a waiver. An example of a written waiver is a disclaimer, which becomes a waiver when accepted...

). Loans and negotiations with creditors can also help debtors to avoid wage garnishment.

In many states when the person is an employee or appointee of a governmental unit the writ is called a Writ of Sequestration
Sequestration (law)
Sequestration is the act of removing, separating, or seizing anything from the possession of its owner under process of law for the benefit of creditors or the state.-Etymology:...

. These are processed by the courts in the same manner as garnishments and are subject to the same wage exemptions.
In the United States, firing an employee to avoid handling a levy may be a criminal offense. Federal law provides for a fine of up to $1,000 and imprisonment for up to one year on an employer who willfully fires an employee in connection with a garnishment of the employee's earnings.

Attachment

The other type of garnishment, also known as attachment, (or attachment of earnings
Attachment of earnings
Attachment of Earnings is a legal process in civil litigation by which a defendant's wages or other earnings are taken to pay for a debt. This collections process is used in the common law system, especially Britain and the United States, but in other legal regimes as well.Ballentine's Law...

), requires the garnishee to deliver all the defendant's money and/or property in the hands of the garnishee at the time of service of process to the court, to be paid over to the plaintiff. Since this type of garnishment is not continuing in nature, but is not subject to the type of restrictions that apply to wage garnishment, it is most often used against banks, or other persons or companies that incur liquidated obligations in the regular course of business. The garnishment should not begin during the pay period but instead on the following pay period

U.S. federal tax rules

Under U.S. federal tax law, a garnishment by the Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...

 (IRS) is a form of administrative levy
Tax levies
A Tax levy, under United States Federal law, is an administrative action by the Internal Revenue Service under statutory authority, without going to court, to seize property to satisfy a tax liability. The levy "includes the power of distraint and seizure by any means". The general rule is that no...

. In the case of an IRS levy, no court order is required.

Only a few requirements must be met before the IRS starts a wage garnishment:
  • The IRS must have assessed the tax and must have sent a written Notice and Demand for Payment;
  • The taxpayer must have neglected or refused to pay the tax within the time prescribed in the notice; and,
  • The IRS must have sent a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy.


The IRS may serve the Final Notice in person, may leave the notice at the taxpayer’s home or usual place of business, or may send it to the last known address by certified or registered mail. The IRS is required to send the Final Notice to the last address known to the agency. The taxpayer does not need to actually receive the notice for the notice to be effective. Many taxpayers never actually receive the final notice. Those taxpayers may not realize they are in danger of receiving a levy until their wages are actually garnished.

See also

  • Attachment of earnings
    Attachment of earnings
    Attachment of Earnings is a legal process in civil litigation by which a defendant's wages or other earnings are taken to pay for a debt. This collections process is used in the common law system, especially Britain and the United States, but in other legal regimes as well.Ballentine's Law...

  • Collections
    Collection agency
    A collection agency is a business that pursues payments of debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed....

  • Distraint
    Distraint
    Distraint or distress is "the seizure of someone’s property in order to obtain payment of rent or other money owed", especially in common law countries...

  • Judgment
    Judgment
    A judgment , in a legal context, is synonymous with the formal decision made by a court following a lawsuit. At the same time the court may also make a range of court orders, such as imposing a sentence upon a guilty defendant in a criminal matter, or providing a remedy for the plaintiff in a civil...

  • Student Loan Default
    Student loan default
    Defaulting on a student loan in the United States can have a number of negative consequences. To understand loan default, it is helpful to have a few common terms defined:Loan Deferment is a postponement of a loan's repayment...

  • Tax refund interception
    Tax refund interception
    A tax refund interception is the act of an agency responsible for sending tax refunds using all or part of a refund to fulfill an obligation of the taxpayer rather than sending the money to the taxpayer him/herself...

  • Working under the table
  • Sequestration
    Sequestration
    In law, sequestration may refer to:* Sequestration , the seizure of property* the isolation of a jury in order to ensure they are not prejudiced by external contact* In Scottish law, the term for bankruptcy* In U.S...

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
x
OK