Tuesday, June 18

What Employers and Employees Need to Know About Wage Garnishment Procedures

Wage garnishment is legal method creditors use to collect debts they have not been able to get paid. It can be used against consumer debts like credit cards, unpaid medical bills, or overdue child support payments.

Creditors must obtain a court order before they can garnish your wages. 

Employer’s Notice

Depending on the type of debt, employers must follow specific legal guidelines in processing garnishments. Failure to follow these rules can result in fines and penalties as significant as an employee’s debt, so ensuring your processes are compliant is essential.

Once you receive a wage garnishment order, the first step is to notify your employee. This notice should confirm receipt and indicate that you intend to comply with the court’s garnishment orders. This communication must be sent within one week of receiving the order and should contain a contact number in case of questions.

It would be best to determine how much to withhold based on the garnishment order and federal and state laws. It’s a good idea to hire a CPA or payroll provider to help you with this process, as it can be complicated and time-consuming to do yourself.

Wage garnishment procedures vary from state to state and can be complex for companies that operate across multiple states. Many businesses, especially those with remote employees, need help with this issue because of the wide variety of laws they must comply with.

In addition to understanding the garnishment procedures, employers also need to ensure they understand their responsibilities and obligations. This includes notifying HR or payroll departments of the garnishment so they can enter the relevant information into payroll and send payments as needed.

Creditor’s Notice

Creditors often garnish a debtor’s wages to collect money that is owed. These debts can be court judgments, money owed to the IRS for back taxes, and other unsecured debts like credit card bills.

When a creditor gets an income execution order, it sends a notice of the garnishment to an enforcement officer in your state. 

The creditor’s notice includes information about how much of your earnings will be garnished, how the amounts will be calculated, and when they will start being taken from your paycheck. The creditor also gives you information about what to do to vacate or cancel the garnishment.

If you receive a creditor’s notice that contains a writ for periodic garnishment, you must review it carefully and complete and return it to the creditor. Your employer may not cancel the writ, but it will continue until you pay the entire judgment amount plus interest and costs.

In addition, you must keep a copy of the writ until the court cancels it. You may get the writ canceled by filing an appeal with the court.

You can also ask the creditor for a statement that shows how much of your earnings has been garnished and how that withholding applied to your judgment’s principal, interest, fees, and costs. This statement does not need to be filed with the court but must be mailed to you and your employer at least once monthly.

Court Order

A creditor can garnish your wages if you owe money to them and haven’t paid it back. This happens when the creditor obtains a judgment against you and a court order that forces your employer to withhold part of your wages and pay it to the creditor.

The best way to deal with a wage garnishment is to work with an attorney or debt relief nonprofit to develop a plan for repaying your debts and resolving the garnishment.

Consider bankruptcy if you’re struggling with multiple debts, especially if one or more of your creditors is a bank or financial institution. In many cases, filing for bankruptcy can wipe out all your debts and allow you to start fresh with a clean slate.

The amount of your paycheck that can be garnished depends on the debt you owe, your state’s laws, and your employer’s policies. Some debts, such as past-due taxes and child support, are prioritized over others, while others, like debts to your local government, may have different garnishment limits than other debts.

In addition, federal law protects you from being fired because of wage garnishment. Still, it only applies if the judgment is for a single debt and your employer fires you for having more than one wage garnishment in a calendar year. If you are being garnished for more than one debt, it is essential to consult an attorney or HR expert about how best to handle the situation.

It is also essential to know that certain types of income – such as Social Security and veterans benefits – are exempt from wage garnishment.

IRS Levy

A wage levy is a process that the IRS uses to collect money from your wages. It can happen when you owe back taxes, file for bankruptcy, or are in other situations that make it difficult to pay your tax bill.

The IRS can levy your wages from every paycheck until you pay what’s owed or agree with the agency to resolve your problem. This levy can devastate your financial life and may require you to take time away from work or lose your job.

Before garnishing your wages, the IRS must first issue a levy notice. This will be sent directly to your employer, who will notify you.

Once the levy is received, the employer must follow the statutory procedures governing handling a wage levy. These procedures are designed to protect you and your employer and help ensure you get paid the money you are owed. When an employer receives a levy notice, they must withhold taxes from their paychecks as soon as possible. This is done following Internal Revenue Code section 6331.

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