Reasons to Be Exempt From Wage Garnishments
Having your wages garnished can create a financial hardship for you. Garnishment may happen for a number of reasons including child support, alimony payments or even as a result of a judgment against you by a creditor. States do not have uniform garnishment laws, but some common sources of income and savings are often exempt from garnishment.
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Social Security
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Social Security income is money you receive when you reach a minimum age of 62. This income is a form of insurance you have paid for over your lifetime. The benefit payment you receive is based on the number of years you work and the income you've made. Garnishments of Social Security payments are generally exempt under section 207 of the Social Security Act, though some exceptions to this rule are garnishments for child support, alimony and repayment of government debt like back taxes or government loans.
Pensions & Retirement
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Pensions are retirement plans set up for your benefit by your employer. These plans may be excluded partially or wholly from garnishment under your state's laws. Private retirement benefits are normally exempt from bankruptcy proceedings, but may not be exempt from garnishment once you start receiving payments from the account. Employer-based plans, like 401k plans, may be exempt from garnishment and are exempt from seizure under the Employee Retirement Income Security Act.
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Insurance
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Many states provide protections against garnishment when you are receiving money from a cash value life insurance policy. Some, but not all, states also protect money you receive from an annuity policy. These insurance contracts are regulated at the state level, and are therefore subject to state laws on garnishment and seizure.
Maximum Thresholds
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Many states provide for a maximum threshold for garnishment. You may owe money for child support, alimony, and you may have many creditors trying to collect money from you. However, your state may protect you from having all of your money taken from you through garnishment. A maximum threshold is typically specified as a percent of income that you make. Any claims made in excess of this amount will go unsatisfied until other debts are repaid and you have additional money to repay your creditors.
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