Wage garnishment: how does it impact your finances?

dots overlay

Wage garnishment: how does it impact your finances?

By Editorial Team | 7th February 2019
brand main banner

Before your employer starts garnishing your wages, your creditors must first file a lawsuit in court and then win the judgement. If you don’t fulfill your obligations, the creditors can then ask the court for a court judgement authorizing wage garnishment. This rule also applies to all types of creditors, including payday loan lenders such as Advance America, Cash Central, CashNetUSA, Rise and Speedy Cash.

The amount to be garnished is regulated by federal laws. The Consumer Credit Protection Act stipulates a maximum wage garnishment amount as follows:

  • If you earn more than $290, 25% of that amount can be garnished, or:
  • Any amount above 30 times the federal minimum wage of $7.25. This means any amount above $217.50.

Therefore, if your disposable income is less than $217.50, your wages cannot be garnished. If less than $290, but more than $217.50, garnishment applies to the amount above $217.50. If your disposable income is more than $290, 25% of your income can be garnished.

Note that up to 60% of your wage can be garnished if you are behind on your child support payments.

6 ways wage garnishment can impact your finances

If creditors have to resort to wage garnishment to collect your debts, this can impact your finances in the following ways:

1. Your financial situation will be made public

As embarrassing as it is, a large number of employees fall victim to wage garnishment. In 2014, ADP published results of a study conducted on 13,000,000 employees. The study showed that 7.6% of employees had gone through wage garnishment. The most common reasons for garnishment were child support and other consumer credit loans.

If you like to keep your financial struggles secret, having your employer know that you are not only in debt but have defaulted to the point where the court has to intervene can be humiliating. You can avoid this situation by paying your debts before your employers learn about it.

Wage Garnishment definition written on a paper.
A wage garnishment order makes your financial situation public (Picture: iStock by Getty)
2. You will lose your financial independence

We work for the freedom to spend our income as we see fit. If the court rules in favor of wage garnishment against you, you will lose the freedom to dictate your finances. What’s more, you will find it more difficult to save money or plan for the future when you are under a wage garnishment order. This is because until your debt is fully paid off, you will be working for those you owe as opposed to working for your future.

3. Your place of business will be affected

Wage garnishment will not only affect you but your employer as well. Good work depends on highly motivated employees and financial stress resulting from wage garnishment month after month will result in low motivation which may in turn decrease productivity. You will also cost your employer working hours whenever you have to attend a garnishment hearing.

You could also land your employer into serious trouble with the law if they don’t comply with the conditions of your garnishment. Laws differ from state to state but one thing is clear: failing to follow them can lead to heavy fines and in some states, imprisonment. For instance, in Delaware, an employer cannot discipline an employee for failing to attend work because of a wage garnishment court proceeding.

4. Termination

According to the CCPA, your employer should not fire you for garnishment of one debt. This protection however does not extend to multiple garnishments. A wage garnishment order puts liability for payment of your debts on your employer’s shoulders. Firing you absolves your employer of this responsibility.

An attractive young housewife wears a shirt at home and examines gas and electricity bills. grimly considers spending this month and is under stress when checking accounts.
Wage garnishment puts pressure on your employer (Picture: iStock by Getty)
5. Wage garnishment will affect your credit score

Garnishment orders are public records and can be accessed by anyone, including credit reporting firms, banks and even landlords. More so, a garnishment order will lower your credit score and potentially affect many aspects of your life including employment and access to credit facilities. Credit reports dedicate an entire section to information in the public records and can lower your credit score by 150 points for each garnishment.

It may take time to improve your credit score if you have had a spell of bad debts, but this should begin to happen after you fulfill the garnishment order by paying what you owe.

6. You will pay more than just the garnishment

There are fees that come with wage garnishment and most state laws permit such fees to be deducted from wages. The fee amount to be deducted varies by state and can be quite high in some cases. Furthermore, in some states, this fee is assessed during each pay period. It’s also worth bearing in mind that child support garnishment fees are higher than other fees.


In light of the consequences discussed above, you should not allow wage garnishment to drag on for months. If you notice a garnishment deduction on your pay slip, the best course of action is to estimate the number of garnishments required to clear your debts. You can then take a plan of action, such as calling your creditors to seek a repayment plan.

Written by
Editorial Team
Our Editorial Team is constantly watching for new and exciting services to report on. They aim to bring balanced, honest reviews to the site to give you the best comparisons and ensure you have the knowledge to choose the product right for you. Read more.
0 thoughts on “Wage garnishment: how does it impact your finances?

Leave a Reply

Your email address will not be published. Required fields are marked *. Your comment will have to be approved first and will not appear immediately.