Garnishment actions on wages and bank accounts
Garnishment of wages comes in two forms; “Court Ordered Garnishment and a Money Judgment has been granted” and “Administrative Wage Garnishment.
Court Ordered Garnishment : This type of garnishment includes wages, bank accounts and other assets. A court order directing a party holding funds (such as a bank) or about to pay wages (such as an employer) to an alleged debtor to set that money aside until the court determines (decides) how much the debtor owes to the creditor. Garnishing funds is also a warning to the party holding the funds (garnishee) not to pay them, and to inform the court as to how much money is being held. If the garnishee (such as a bank or employer) should mistakenly give the money to the account owner or employee, the garnishee could be liable to pay the creditor what he/she/it has coming.
Garnishing wages is a typical means used to collect child support, alimony payments and money judgments. In some states, installment payments are made to the sheriff and the sheriff then gives the payments (or entire amount if all at once) to the person to whom the money is owed.
Administrative Wage Garnishment (AWG): Used as a last resort by the U.S. Department of Education (DoE) to recover defaulted student loans. Thirty (30) days prior to the issuance of the “Order of Withholding”, a notice is sent to students advising them of the department’s intent to garnish wages. This notice also contains your rights and appeal procedures. Student Loan Garnishment
For in-depth information on How to Garnish or How the Garnishment process works see wage and bank account garnishment actions
Social Security and Garnishment:
Generally, Social Security benefits are exempt from execution, levy, attachment, garnishment, or other legal process, or from the operation of any bankruptcy or insolvency law. The following benefits are exceptions and subject to garnishment:
(1) to the authority of the Secretary of the Treasury to make levies for the collection of delinquent Federal taxes and under certain circumstances delinquent child support payments; and
(2) to garnishment or similar legal process brought by an individual to enforce a child support or alimony obligation.
Section 207 of the Social Security Act provides: “The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”
However, section 6331 of the Internal Revenue Code of 1954 (26 U.S.C. 6331) which was enacted into law on August 16, 1954, after the enactment of section 207, gives the Secretary of the Treasury the right to levy or seize for collection of delinquent Federal taxes, property, rights to property, whether real or personal, tangible, or intangible and the right to make successive levies and seizures until the amount due, together with all expenses, is fully paid. References: SSR 79-4: SECTIONS 207, 452(b), 459 and 462(f) (42 U.S.C. 407, 652(b), 659 and 662(f)) LEVY AND GARNISHMENT OF BENEFITS 20 CFR 404.970 SSR 79-4 See the code here
The Social Security Administration (SSA) recently changed it’s rules to allow the collection of overdue Program and Administrative Debts using Administrative Wage Garnishment !
The regulations dealing with the collection of program overpayment debts that arise under titles II and XVI of the Social Security Act (the Act) and administrative debts owed to the SSA have been modified. Specifically, the change establishes new regulations on the use of administrative wage garnishment (AWG) to collect such debts when they are past due. AWG is a process whereby the SSA orders the debtor’s employer to withhold and pay the SSA up to 15 percent of the debtor’s disposable pay every payday until the debt is repaid.
The employer is required by law to comply with the AWG order. These new rules are effective January 22, 2004. (References: SOCIAL SECURITY ADMINISTRATION 20 CFR Parts 404, 416 and 422 RIN 0960-AE92 Federal Old-Age, Survivors, and Disability Insurance and Supplemental Security Income
Read the full text of the Debt Collection Improvement Act http://www.fms.treas.gov/news/factsheets/dcia.html
Garnishment of Bank Accounts
Bank accounts can be garnished and, when they are, it is almost always a surprise to the debtor. What typically happens is collectors obtain money judgments (usually by default) and then use the judgment to freeze the funds in your bank account. State law and banking rules govern how the bank must handle the garnishment process.
Collectors always notify the bank first and then notify the debtor. This way your funds are frozen before you can take any action such as withdrawing all your funds. Notifying the bank first is perfectly legal. You typically receive the notice (including your rights) a day or two after your funds have been frozen.
In most states, the garnishment can only freeze funds already in your account at the time of service on the financial institution. During the time the garnishment is in effect, the financial institution cannot honor checks or other orders for the payment of money drawn against your account. This means any outstanding checks will more than likely bounce or be returned for NSF. The exception to this rule is if your account has more on deposit than the amount of the garnishment. In this case, the bank can honor checks up to the amount that will reduce your funds below the amount of the garnishment. When the amount being garnished is paid, the freeze on your account must be terminated.
Federal law limits the maximum amount that can be garnished by one or more garnishment orders to 25 percent of your disposable earnings for that week, or the amount by which disposable earnings for that week exceed thirty times the Federal minimum hourly wage, whichever is less.
In simple terms, “disposable income” is whatever money you have left after paying all required taxes and national insurances! Disposable income is after-tax income that is officially calculated as the difference between personal income and personal tax and non-tax payments. In general terms, personal tax and non-tax payments are about 15% of personal income, which makes disposable personal income about 85% of personal income.
IMPORTANT: In order for wages to be garnished, disposable earnings per week must exceed thirty times the federal minimum hourly wage or $154.50. Put another way, if you make $154.50 or less per week your wages cannot be garnished.
Let’s look at two examples:
Example using minimum wage
Weekly earnings: $206 ($5.15 x 40 hours)
Disposable income: $175 ($206 x .85) some states use .75
Disposable income above the federal minimum ( $154.50) that can be garnished: $20.50 ($175 – $154.50 = $20.50)
Total amount of garnishment per week: $5.15 ($20.60 x .25 = $5.15)
Example using a higher wage
Weekly income: $360 ($9.00 x 40 hours)
Disposable income: $306 ($360 x .85 ) some states use .75
Disposable income above the federal minimum ( $154.50) that can be garnished: $151.50 ($306 – $154.50 = 151.50)
Total amount of garnishment per week $37.87 ($151.50 x .25 = $37.87)
WARNING: The above are general examples, ALWAYS check your State Wage Garnishment and Attachment Rules to be sure you are figuring the correct amount.
As of April 2005, the federal minimum wage is $5.15 however there are states with lower minimum wages as of April 2005:
States with Higher Wages: Washington, Oregon, California, Maine, Vermont, New York, Massachusetts, Connecticut, Rhode Island, Delaware, Alaska and Illinois.
States with lower minimum wages: Kansas and Ohio
States with no minimum wage law: Arizona, Louisiana, Mississippi, Alabama, Florida, South Carolina and Tennessee “
There are four exceptions to the 25 percent rule:
Child support or alimony orders;
Orders of any court of the United States having jurisdiction over cases under chapter 13 of title 11;
Any debt due for any State or Federal tax; and
Defaulted student loans.
If you believe your wages are being garnished illegally, or you believe you are a victim of illegal or unfair debt collection practices, submit your information to a FREE* Fair Debt Lawyer by:
- Clicking here for a FREE* Fair Debt Case Review;
- Calling toll free 888-FDCPA-LAW (888-332-7252);
- Clicking here to locate a FREE* Fair Debt Lawyer.
The debt collector may just be liable to you for statutory damages of up to $1,000, plus any actual damages suffered, plus attorney fees!