Garnishment

Garnishment

A garnishment is a means of collecting a monetary judgment against a defendant by ordering a third party (the garnishee) to pay money, otherwise owed to the defendant, directly to the plaintiff.

United States

Wage garnishment

Wage garnishment, the most common type of garnishment, is the process of deducting money from an employee's monetary compensation (including salary) as a result of a court order. In the United States, such payments are limited by federal law to 25 percent of the disposable income that the employee earns. Wage garnishments continue until the entire debt is paid or arrangements are made to pay off the debt. Garnishments can be taken for any type of debt but common examples of debt that result in garnishments include:
* child support
* taxes
* unpaid court fines
* defaulted student loans
* any other type of monetary judgment

When served on an employer, garnishments are taken as part of the payroll process. When processing payroll, sometimes there is not enough money in the employee's net pay to satisfy all of the garnishments. In such a case, the correct order to take a garnishment must be satisfied. For example, in a case with federal tax, local tax, and credit card garnishments, the first garnishment taken would be the federal tax garnishments, then the local tax garnishments, and finally, garnishments for the credit card. Employers receive a notice telling them to withhold a certain amount of their employee's wages for payment and cannot refuse to garnish wages.

Wage garnishment can negatively affect credit, reputation, and the ability to receive a loan or open a bank account.

At present four U.S. states — North Carolina, Pennsylvania, South Carolina and Texas — do not allow wage garnishment at all except for debts related to taxes, child support, federally guaranteed student loans, and court-ordered fines or restitution for a crime the debtor committed. Several other states observe maximum thresholds that are lower than the 25 percent maximum provided by federal law. States may also prohibit garnishment altogether in certain circumstances. For example, in Florida the wages of a person who provides more than half the support for a child or other dependent are exempt from garnishment altogether (though this exemption is subject to waiver). Loans and negotiations with creditors can also help debtors to avoid wage garnishment.

Attachment

The other type of garnishment, also known as "attachment", (or attachment of earnings), requires the garnishee to deliver all the defendant's money and/or property in the hands of the garnishee at the time of service of process to the court, to be paid over to the plaintiff. Since this type of garnishment is not continuing in nature, but is not subject to the type of restrictions that apply to wage garnishment, it is most often used against banks, or other persons or companies that incur liquidated obligations in the regular course of business. The garnishment should never begin during the pay period but should begin on the following pay period

I.R.S. rules

There are only a few requirements that must be met before the IRS starts a wage garnishment:
* The IRS must have assessed the tax and sent a Notice and Demand for Payment;
* The taxpayer must have neglected or refused to pay the tax; and,
* The IRS must have sent a Final Notice of Intent to Levy and Notice of Your Right to A Hearing (levy notice) at least 30 days before the levy.

The IRS can serve the Final Notice in person, leave it at the taxpayer’s home or usual place of business, or send it to the last known address by certified or registered mail. It is important to note that the IRS is only required to send the Final Notice to the last address known to it. The taxpayer does not need to actually receive the notice for it to be effective. Many taxpayers never actually receive the final notice. Those taxpayers may not realize they are in danger of receiving a levy until their wages are actually garnished. Can not take more than 2% of the person's wages.

See also

* Attachment of earnings
* Judgment
* Collections
* Tax refund interception
* Working under the table

References

* [http://www.centsableaccounting.com/resources/articles/stopgarnishments.asp How to Stop Wage Garnishment]
* [http://bankruptcy-law.freeadvice.com/collections/wage-garnishments.htm Avoid Wage Garnishment]
* [http://irsos.com/levywa.htm Information on Dealing With IRS Wage Levies]
* [http://www.ctctax.com/TS_getIRStaxlevyreleased.asp Four Ways to Release IRS Wage Levy]


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