'Garnishment' is explained in detail and with examples in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
Garnishment of wages refers to a legal procedure which results in an employer withholding part of an individual’s earnings so that a debt can be paid. The vast majority of such garnishments occur because of an order from the court.
Other types of this form of wage collection happen when either a state taxing agency or the IRS itself levies wages against taxes that are not paid. Other federal agencies may similarly garnish wages for debts people owe the federal government which are not tax related. A voluntary wage assignment should not be confused with garnishing wages. Sometimes employees will instead agree of their own free will to turn over part of their earnings to creditors or for child support.
Federal law governs the garnishing of wages. The Consumer Credit Protection Act in Title III controls the maximum totals that may be taken from an employee’s earnings. It also safeguards the employees so that they may not be fired when their pay is garnished for a single debt. The U.S. Department of Labor and its Employment Standards Administration administers this Title III under its Wage and Hour Division. It may not order or countermand wage garnishment. The courts or agencies responsible for beginning the garnishing are the only ones which can modify or cancel such judgments or actions.
This garnishing law applies to any individuals who earn personal income from a job, such as from salaries, wages, bonuses, commissions, or from other forms of earnings like from retirement vehicles or pensions. Tips are not covered by the laws on garnishing wages. This law enforces a maximum sum that may be taken from any pay period or work week earnings, no matter how many orders the employer receives. Normal garnishments that are not for taxes or child support may not exceed 25% of the disposable earnings of the employee.
Alimony or child supports have their own maximum amount limitations. When the worker supports another child or spouse, the law permits as much as 50% of disposable earnings to go for child or alimony support. If no other spouse or child is involved, then as much as 60% may be taken from payroll for such alimony or child support. Besides this when support payments are behind, another 5% may be garnished to catch up on back payments.
Other garnishments have different maximum earnings amounts for which the law allows. Federal agencies and agencies collecting on their behalf may take as much as 15% of all disposable earnings in order for the U.S. government to be repaid. This amount also applies for monies that have been defaulted on to the federal government. The Department of Education guaranty division is authorized by the Higher Education Act to take as much as 10% of disposable income in order to pay back federal student loans on which the borrowers have defaulted.
The way that these wage garnishments work is that the courts issue an order to collect monies that the defendant owes. These debts typically center around judgments on tax debts, child support, criminal fines, or other personal debts. The order to garnish wages is then sent to the employer of the defendant.
The employer is responsible for setting aside the part of the employee’s wages that are to be utilized for paying the debt of the person incrementally. Often these payments go directly to the court which ordered them. There are cases where instead the garnished wages transfer to an agency that acts as intermediary which then processes and distributes the payments.