What Income Can Creditors Not Garnish?
Garnishments are court orders that compel your employer or financial institution to withhold funds from your wages, bank accounts or other assets. The garnished monies are then sent to a creditor to pay your debts. The amount that can be withheld and the type of income that can be garnished varies by state, but certain types of income may be excluded from garnishments.
Income That Cannot be Garnished
While each state has its own garnishment laws, most say that Social Security benefits, disability payments, retirement funds, child support and alimony cannot be garnished for most types of debt. For example, if you owe credit card debt or medical bills, the courts have a process for you to protect those types of income from garnishments. This means your wages are typically up for grabs, as are any investment income you may have.
Type of Debt Matters
The type of debt you owe is critical in determining whether your income is safe from a garnishment. When you owe debt for federal and state taxes, student loans, child support or alimony, the state may allow creditors to garnish your Social Security payments, disability, retirement, child support or alimony, reports Bankrate. If you are concerned about a garnishment depleting your already limited funds, consider paying your tax liability, student loan debt and support payments before commercial debt.
Each state sets the maximum amount that can be garnished out of your wages, and the maximum may be different for each type of debt. As of the date this article was written, federal law, which supersedes state laws, allows no more than 25 percent of your income after insurance and taxes to be garnished. Federal law allows for a higher percent of garnishment if you owe state or federal taxes, bankruptcy settlements, student loan debt or child or alimony support. The court decides if the garnishment continues until the debt is paid off or until a specific date.
Poverty Lowers the Amount
If a 25 percent hit to your paycheck will make it impossible to support you or family, you have the right to contact the court that issued the order to garnish and request a lower garnishment, advises the website Fair Debt Collection. Be prepared to provide an accounting of your normal living expenses to justify your request. The request for a lower garnishment amount can be made when you go to court, or if your situation changes later, you can notify the court and ask for a reduction then.