Fair Debt Collection
Beware if a judgment has been entered against you, your money may be intercepted through a wage garnishment or bank levy before you even realize. If you owe creditors, collectors or anyone else money, they can obtain a money judgment and have the funds in your bank account frozen or they can seize them outright. Federal wage garnishment law dictates how much can be seized or garnished from you and the conditions for doing so.
Anyone who owes you money or holds money for you (for example, your employer or bank) is called a “garnishee defendant.” Through the garnishment process, they can be forced to reveal to the court how much money you make or are owed. The court can then issue a Writ of Garnishment forcing the bank or your employer to pay a certain part of the disposable income owed to you.
If a debt collector has improperly seized or frozen your bank account, or if you believe you are a victim of unfair or illegal debt collection tactics, 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. Start your analysis by reviewing the federal wage garnishment law, and by understanding of your state’s wage garnishment laws and state wage garnishment procedures.
What is disposable income?
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.
When applying for certain state, federal and private benefits and protections, the term “disposable income” may change slightly. For instance when applying for loans, mortgages, credit cards and veterans home loans, disposable income is that income left over after paying all required taxes, national insurances and all essentials such as food, clothing, and shelter.
Some state and federal assistance programs look at disposable income as “any income available for spending and saving.” Generally this means money left over after taxes and fixed costs such as rent/mortgage, food, car payments, insurance, etc.) Disposable income is also defined as the total income that can be used by a household for either consumption or saving during a given period of time, usually one year.
Another way to define disposable income is that portion of an individual’s income (wages and salaries, interest and dividend payments from financial assets, and rents and net profits from businesses as well as capital gains on real or financial assets) over which the recipient has complete discretion. Usually, the following are not included in your disposable income:
- Tax and insurances;
- Ex-spousal maintenance or child support;
- Housing costs like mortgages or rent (less any housing benefit) and other taxes. premiums and other costs associated with where you live;
- Employment related expenses, for example travel costs;
- Childrearing charges, if you are receiving a wage or salary and actually pay a private service provider. Deduction can only be made for children 15 or under, (unless they are disabled in which case there will be no limit on age);
- If you are in receipt of certain state benefits on top of your income then these will be disregarded a well (e.g., disability living allowance, invalid care allowance, council tax benefit, housing benefit, payments out of the social fund etc.);
If a debt collector is seeking to garnish more than your disposable income, or 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 for a free no obligation review.
Federal Wage Garnishment Law, 15 USCA §§ 1671-1677
15 U.S.C.A. § 1671 Congressional findings and declaration of purpose
(a) Disadvantages of garnishment
The Congress finds:
(1) The unrestricted garnishment of compensation due for personal services encourages the making of predatory extensions of credit. Such extensions of credit divert money into excessive credit payments and thereby hinder the production and flow of goods in interstate commerce.
(2) The application of garnishment as a creditors’ remedy frequently results in loss of employment by the debtor, and the resulting disruption of employment, production, and consumption constitutes a substantial burden on interstate commerce.
(3) The great disparities among the laws of the several States relating to garnishment have, in effect, destroyed the uniformity of the bankruptcy laws and frustrated the purposes thereof in many areas of the country.
(b) Necessity for regulation
On the basis of the findings stated in subsection (a) of this section, the Congress determines that the provisions of this subchapter are necessary and proper for the purpose of carrying into execution the powers of the Congress to regulate commerce and to establish uniform bankruptcy laws.
(Pub.L. 90-321, Title III, § 301, May 29, 1968, 82 Stat. 163.)
Current through P.L. 115-231. Also includes P.L. 115-233 to 115-270 and 115-272 to 115-277. Title 26 current through P.L. 115-277.
15 U.S.C.A. § 1672 Definitions
For the purposes of this subchapter:
(a) The term “earnings” means compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement program.
(b) The term “disposable earnings” means that part of the earnings of any individual remaining after the deduction from those earnings of any amounts required by law to be withheld.
(c) The term “garnishment” means any legal or equitable procedure through which the earnings of any individual are required to be withheld for payment of any debt.
(Pub.L. 90-321, Title III, § 302, May 29, 1968, 82 Stat. 163.)
Current through P.L. 115-231. Also includes P.L. 115-233 to 115-270 and 115-272 to 115-277. Title 26 current through P.L. 115-277
15 U.S.C.A. § 1673 Restriction on garnishment
(a) Maximum allowable garnishment
Except as provided in subsection (b) and in section 1675 of this title, the maximum part of the aggregate disposable earnings of an individual for any workweek which is subjected to garnishment may not exceed
(1) 25 per centum of his disposable earnings for that week, or
(2) the amount by which his disposable earnings for that week exceed thirty times the Federal minimum hourly wage prescribed by section 206(a)(1) of Title 29 in effect at the time the earnings are payable,
whichever is less. In the case of earnings for any pay period other than a week, the Secretary of Labor shall by regulation prescribe a multiple of the Federal minimum hourly wage equivalent in effect to that set forth in paragraph (2).
(b) Exceptions
(1) The restrictions of subsection (a) do not apply in the case of
(A) any order for the support of any person issued by a court of competent jurisdiction or in accordance with an administrative procedure, which is established by State law, which affords substantial due process, and which is subject to judicial review.
(B) any order of any court of the United States having jurisdiction over cases under chapter 13 of Title 11.
(C) any debt due for any State or Federal tax.
(2) The maximum part of the aggregate disposable earnings of an individual for any workweek which is subject to garnishment to enforce any order for the support of any person shall not exceed–
(A) where such individual is supporting his spouse or dependent child (other than a spouse or child with respect to whose support such order is used), 50 per centum of such individual’s disposable earnings for that week; and
(B) where such individual is not supporting such a spouse or dependent child described in clause (A), 60 per centum of such individual’s disposable earnings for that week;
except that, with respect to the disposable earnings of any individual for any workweek, the 50 per centum specified in clause (A) shall be deemed to be 55 per centum and the 60 per centum specified in clause (B) shall be deemed to be 65 per centum, if and to the extent that such earnings are subject to garnishment to enforce a support order with respect to a period which is prior to the twelve-week period which ends with the beginning of such workweek.
(c) Execution or enforcement of garnishment order or process prohibited
No court of the United States or any State, and no State (or officer or agency thereof), may make, execute, or enforce any order or process in violation of this section.
(Pub.L. 90-321, Title III, § 303, May 29, 1968, 82 Stat. 163; Pub.L. 95-30, Title V, § 501(e)(1) to (3), May 23, 1977, 91 Stat. 161, 162; Pub.L. 95-598, Title III, § 312(a), Nov. 6, 1978, 92 Stat. 2676.)
Current through P.L. 115-231. Also includes P.L. 115-233 to 115-270 and 115-272 to 115-277. Title 26 current through P.L. 115-277.
15 U.S.C.A. § 1674. Restriction on discharge from employment by reason of garnishment
(a) Termination of employment
No employer may discharge any employee by reason of the fact that his earnings have been subjected to garnishment for any one indebtedness.
(b) Penalties
Whoever willfully violates subsection (a) of this section shall be fined not more than $1,000, or imprisoned not more than one year, or both.
(Pub.L. 90-321, Title III, § 304, May 29, 1968, 82 Stat. 163.)
Current through P.L. 115-231. Also includes P.L. 115-233 to 115-270 and 115-272 to 115-277. Title 26 current through P.L. 115-277.
15 U.S.C.A. § 1675. Exemption for State-regulated garnishments
The Secretary of Labor may by regulation exempt from the provisions of section 1673(a) and (b)(2) of this title garnishments issued under the laws of any State if he determines that the laws of that State provide restrictions on garnishment which are substantially similar to those provided in section 1673(a) and (b)(2) of this title.
(Pub.L. 90-321, Title III, § 305, May 29, 1968, 82 Stat. 164; Pub.L. 95-30, Title V, § 501(e)(4), May 23, 1977, 91 Stat. 162.)
Current through P.L. 115-231. Also includes P.L. 115-233 to 115-270 and 115-272 to 115-277. Title 26 current through P.L. 115-277.
15 U.S.C.A. § 1676. Enforcement by Secretary of Labor
The Secretary of Labor, acting through the Wage and Hour Division of the Department of Labor, shall enforce the provisions of this subchapter.
(Pub.L. 90-321, Title III, § 306, May 29, 1968, 82 Stat. 164.)
Current through P.L. 115-231. Also includes P.L. 115-233 to 115-270 and 115-272 to 115-277. Title 26 current through P.L. 115-277.
15 U.S.C.A. § 1677. Effect on State laws
This subchapter does not annul, alter, or affect, or exempt any person from complying with, the laws of any State
(1) prohibiting garnishments or providing for more limited garnishment than are allowed under this subchapter, or
(2) prohibiting the discharge of any employee by reason of the fact that his earnings have been subjected to garnishment for more than one indebtedness.
(Pub.L. 90-321, Title III, § 307, May 29, 1968, 82 Stat. 164.)
Current through P.L. 115-231. Also includes P.L. 115-233 to 115-270 and 115-272 to 115-277. Title 26 current through P.L. 115-277.