Wage Assignment

What is a Wage Assignment?

 

Wage allocation is the legal procedure by which an employer withholds some of the employee’s salary and puts it toward paying an obligation or debt. It is usually performed to settle court-ordered judgments, the child’s support, alimony, or to pay taxes that are owed. The assignment of wages can also be voluntary when employees agree to have part of their pay automatically taken out to pay the balance of a debt.

 

Key Points About Wage Assignments:

 

• Involuntary Wage Assignments: are usually made through a court order, for example, when child support is involved or in other legal decisions. Employers are obliged by law to conform to the terms of wage assignments.
• A voluntary wage assignment: An employee agrees to have a specific amount taken out of their pay to repay the due. It is usually arranged between the creditor and the employee without the involvement of a court.
• Limits on the amount Limits on Amount: State and federal laws limit the amount that may be taken out of employees’ salaries to ensure that they have enough money to support their families. For instance, federal law restricts garnishment to 25% of disposable earnings or the amount of weekly disposable earnings greater than 30 times the federal minimum wage, whichever is lower.
• End of the line: The assignment of wages typically lasts until the debt is completely paid, unless specifically stated otherwise or in the event that an employee’s financial situation alters significantly.

 

Employers are required to comply with the wage assignment rules, and if they fail to do so, they could face legal sanctions. In certain circumstances, employees may have the right to dispute and negotiate terms for an assignment.

 

How Much Wage Garnishment?

 

State and federal laws govern wage garnishment limits, and the amount that can be taken from your earnings is contingent upon the nature of your debt and your earnings.

 

Here’s a general overview:

 

Federal Law Limits on Wage Garnishment:

 

Consumer Debts (e.g., credit cards, medical bills):

 

Maximum Amount: The lesser of:

 

• 25. 25% of your income (the amount that remains after legal tax-exempt deductions such as tax deductions).
• The amount at which each week’s disposable income surpasses 30 times the minimum wage set by the federal government.  The minimum wage in the United States is $7.25 per hour. 30 times that’s $217.50 per week.

 

Child Support and Alimony:

 

• Up to 50 percent of your disposable earnings when you help a spouse or child.
• Up to 60 60%. Suppose you don’t support your spouse or child.
• An additional 5 percent could be taken from the account if payments are more than 12 weeks late.

 

Federal Student Loans:

 

• Up to 15 percent of the disposable earnings can be redeemed.
• Taxes unpaid. Depending on the circumstances. The amount you pay varies depending on the number of dependents you have and the deduction rates. However, the IRS typically garnishes anywhere between 15% and 70% of your disposable income.

 

State Laws:

 

• State Laws are Different: Certain states have stricter limitations than federal law or provide greater protection for the debtor. For instance, certain states restrict wage garnishment to 10% of the earnings available or even prohibit it entirely for certain kinds of debt.
• States that do not allow garnishment: A few states, such as Texas, generally ban garnishing wages for consumer debts, with the exception of cases involving tax, child support, or federal student loans.

 

Important Considerations:

 

• Court orders: Payday garnishments usually require a court order unless the debt is specific, such as child support, taxes, or federal student loans.
• Compliance by the Employer: Employers are obliged to follow garnishment orders and can be penalized for failing to do so.
• Rights of the Employee: Employees can challenge garnishment orders in court or negotiate with creditors to make different payment options.

 

Knowing your state’s specific laws and the type of loan you have is crucial when it comes to wage garnishment.

 

Can Wage Garnishment be Stopped?

 

Yes, wage garnishment can be prevented by paying the debt off, negotiating a settlement with the creditor, filing for bankruptcy, or suing the garnishment in court if you think it’s illegal and excessive.

 

Does An Employer Have to Honor a Wage Assignment?

 

An employer is required to legally honor a wage allocation when it’s a court order or if the employee has voluntarily agreed to it. Non-compliance could result in legal consequences for the employer.

 

Also See: Wage Garnishments