The simple version

Yesterday we covered what happens when a lender charges off a debt and sells it. If the buyer wants more than phone calls, the next step is a lawsuit. If it wins, a court can order your employer to send part of your pay straight to the creditor, which is called wage garnishment.

That order is not unlimited. Federal law caps garnishment for ordinary debts at the lesser of two numbers, a quarter of your disposable earnings or the amount by which those earnings exceed 30 times the federal minimum wage in a week. Below a fixed weekly floor, nothing can be taken at all.

The numbers

• For ordinary garnishments, meaning those not for support, bankruptcy, or state or federal taxes, the weekly amount may not exceed the lesser of 25% of disposable earnings or the amount by which disposable earnings are greater than 30 times the federal minimum wage (Department of Labor, Wage and Hour Division, Fact Sheet 30, on the Consumer Credit Protection Act)
• The federal minimum wage is $7.25 an hour, which puts the protected weekly floor at 30 times that figure, or $217.50 (Department of Labor)
• Disposable earnings are what remain after deductions required by law. Deductions not required by law, including health and life insurance, union dues, charitable contributions, and retirement plan contributions, generally may not be subtracted when calculating disposable earnings (Department of Labor)
• On a stated $1,000 of weekly disposable earnings, 25% is $250 and the amount above the floor is $782.50, so the cap is $250 (arithmetic)
• On a stated $250 of weekly disposable earnings, 25% is $62.50 and the amount above the floor is $32.50, so the cap is $32.50 (arithmetic)
• At $290 of weekly disposable earnings the two tests produce the same answer, $72.50, which is the point where the percentage cap takes over from the floor (arithmetic; Department of Labor)
• At or below $217.50 a week in disposable earnings, nothing may be garnished for an ordinary debt (Department of Labor)
• An employer may not fire an employee whose earnings are garnished for any one debt, regardless of how many levies are made to collect that one debt, and the protection does not extend to a second or subsequent debt (Department of Labor)
• Court orders for child support or alimony allow up to 50% of disposable earnings when the worker is supporting another spouse or child, or up to 60% when not, plus another 5% for support more than 12 weeks in arrears (Department of Labor)
• The federal caps do not apply at all to debts due for state or federal taxes, or to certain bankruptcy court orders (Department of Labor)
• Federal agencies may garnish up to 15% of disposable earnings for defaulted debts owed to the government, including defaulted federal student loans, and that withholding answers to the Consumer Credit Protection Act limits but not to state garnishment laws (Department of Labor)
• Where a state garnishment law differs from the federal rule, the employer must observe the law resulting in the smaller garnishment (Department of Labor)

How the cap is actually calculated

The rule is a lesser-of test, so you run two calculations and the smaller answer wins. That structure protects a fixed weekly amount at the bottom while capping the percentage at the top.

Start with disposable earnings, and this is where people get surprised. Disposable earnings are what remain after deductions required by law, meaning taxes and similar mandatory withholding. Money you put into a retirement plan or a health premium is still counted, even though it never reaches your bank account.

Then run both tests. A quarter of disposable earnings is the first number, and whatever exceeds $217.50 for the week is the second. On $1,000 of weekly disposable earnings those come to $250 and $782.50, so the cap is $250.

The floor is the part worth remembering. If disposable earnings for the week are at or below $217.50, the second test produces nothing and no ordinary garnishment is allowed. The law draws a line under which a paycheck is left alone entirely.

The exceptions, which are large

The 25% cap covers ordinary debts, which is the category a credit card judgment falls into. Several other categories run under different rules, and the differences are not small.

Child support and alimony carry much higher limits, up to 50% of disposable earnings when the worker supports another spouse or child and up to 60% when not, with another 5% available when support is more than 12 weeks behind. Debts for state or federal taxes and certain bankruptcy court orders sit outside the federal caps altogether.

Defaulted debts owed to the federal government, including federal student loans, follow their own track. A federal agency can garnish up to 15% of disposable earnings, and it does not need the court judgment an ordinary creditor needs first. That withholding still answers to the federal caps, but not to state garnishment law.

State law is the other major variable, and it runs in the protective direction. Where a state rule and the federal rule differ, the employer must observe whichever produces the smaller garnishment. That makes the federal calculation a national ceiling rather than a description of what happens in every state.

One protection is worth knowing on its own. An employer may not fire someone because their wages are being garnished for a single debt, no matter how many levies are made to collect it. That protection does not carry over to a second debt.

The Real Cost lens on a quarter of a paycheck

Put the cap on a stated household so the size is visible. Every assumption here is stated rather than measured.

• On a stated $800 of weekly disposable earnings, the 25% cap allows $200 a week
• Over a year that is $10,400, taken before the money reaches the account
• Because voluntary deductions do not reduce disposable earnings, the calculation runs on a larger number than the one that lands in a paycheck
• The garnishment continues until the judgment is satisfied, which for a large balance carrying interest can mean years rather than months

That is the real weight of the step, and it is why the earlier stages matter. What to do about a lawsuit or a garnishment order depends on your state, your income, the type of debt, and facts this article cannot see. Those questions belong with an attorney, a legal aid office, or a nonprofit credit counselor rather than a news piece.

What this means

Garnishment is the end of a process rather than the start of one. For ordinary consumer debt it requires a lawsuit and a judgment, which means there are stages before it where the matter is still in front of a court rather than behind one.

It is also more bounded than its reputation. A creditor holding a judgment cannot take a paycheck, only a capped share of one, and cannot touch earnings at or below the federal floor. Those limits sit in statute, are enforced by the Department of Labor, and are free to look up.

What this is NOT

This is not legal advice and it is not guidance on responding to a lawsuit, a judgment, or a garnishment order, on claiming an exemption, or on negotiating with a creditor. Those depend on state law that varies substantially and on facts specific to each situation, and they belong with an attorney, a legal aid organization, or a nonprofit credit counselor. This is not a complete account of garnishment law: this article covers the federal cap for ordinary debts, and child support, alimony, federal student loans, taxes, bankruptcy orders, and state rules all differ. This is not a claim that any creditor acts improperly, and collecting on a lawful judgment is a legal right. This is not a recommendation of any debt relief, debt settlement, or credit repair company or service. The dollar figures are stated illustrations, not any real household. This is not investment or financial advice of any kind.

Sources

• U.S. Department of Labor, Wage and Hour Division, Fact Sheet 30, Wage Garnishment Protections of the Consumer Credit Protection Act: https://www.dol.gov/agencies/whd/fact-sheets/30-cppa
• U.S. Department of Labor, Employment Law Guide, Wage Garnishment: https://webapps.dol.gov/elaws/elg/garnish.htm
• 15 U.S.C. 1673, restriction on garnishment: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section1673&num=0&edition=prelim
• 15 U.S.C. 1674, restriction on discharge from employment by reason of garnishment: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section1674&num=0&edition=prelim