Garnishment Rights
The Consumer Credit Protection Act covers wage garnishments and protects employees from losing their jobs as a result of garnishments. Title III of the Act protects employees from being fired simply because their wages have been garnished for any single debt. The Wage Garnishment Act does not protect an employee from being firing if their wages are garnished more than one time.
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When Wages Are Garnished
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The creditor has to seek approval from the court before filing a lawsuit. It could take from six months up to two years for the entire process. If the creditor is granted a judgment, it will present a copy to your employer. Some states---Texas, Pennsylvania and North and South Carolina---will not allow a creditor to garnish wages. But in states that do not allow wage garnishment, the IRS is exempt. And once the money is deposited into a bank account it is no longer considered wages and a creditor can freeze your bank accounts.
Garnishment Limitations
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Title III Section 6(a)(1) of the Fair Labor Standards Act of 1938 protects 75 percent of your wages, so the creditor can only take a maximum of 25 percent of your earnings per week after taxes and deductions have been made, from what is referred to as "disposable income." Title III allows deductions for child support or alimony payments of up to 50 percent of your salary if you are supporting a family and 60 percent if you are not.
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Garnishments and Social Security
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In May 2001, Social Security benefits became subject to garnishment for the first time. Private creditors cannot garnish Social Security benefits, but the federal government can deduct payments from retired people who have defaulted on VA mortgages, student loans, small-business loans, disaster loans and back taxes. The first $750 of an individual's monthly Social Security benefit is protected.
What Are Your Rights?
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Bankruptcy puts a halt to everything, including IRS garnishments. While bankruptcy cannot be filed on back taxes, filing bankruptcy will stop garnishments from the IRS until the bankruptcy is discharged. If you owe back taxes, even if you don't file bankruptcy, but have a garnishment from the IRS, you can file what is called an "Offer in Compromise." An offer in compromise is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer's tax liabilities for less than the full amount owed.
Once a judgment is executed, you have the right to file a "motion to quash" with the court. This motion provides some relief for the debtor because it allows him make an agreement with the court and provides up to three to pay off the debt. Payments are made directly to the court rather than the creditor. If your motion is accepted by the creditor your employer does not have to be involved.
If your state has wage garnishment laws that differ from federal laws, your employer is required to act in accordance with whichever law results in the lesser deduction.
If you are discharged as a result of any one wage garnishment, your employer will be required to reinstate you and pay any back wages and could be subject to fines, prosecution and up to one year in prison.
For More Information
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For more information, contact the U.S. Department of Labor's Employment Standards Administration, Wage and Hour Division help line at (866) 4US-WAGE or visit the website (see Resources). You also may need to contact an attorney.
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