Understanding Wage Garnishments Under Title III of the Consumer Credit Protection Act.
The Consumer Credit Protection Act (CCPA) puts restrictions on the amount of wages an employer can withhold from a person’s earnings in response to a wage garnishment order.
Wage garnishments are commonly a result of a court order after losing a debt collection case to a creditor, these debts can include creditors with a statutory right to collect back taxes, student loan debt, and even child support owed. If a debt judgment is filed against you, the court can and oftentimes will allow the creditor to garnish your earnings. You can also find yourself in a “wage garnishment” situation that is put in place by the IRS or state collection agency.
The CCPA ensures that the consumer only pays what is possible under their specific financial circumstances. Essentially, the CCPA makes sure that the amount of wages garnished will not place the debtor in complete poverty.
Both federal and state laws can dictate exactly how much can be taken out of your paycheck, the federal rules governing wage garnishment under the CCPA Title III. It is more of a math calculation than anything else, as seen below:
Under Federal law, a judgment can amount to;
- 25% of your disposable income, or
- The amount that your income is above 30 times the federal minimum wage rate, whichever is less.
Specific State laws can help lower the amount that is considered disposable income depending on your specific state’s statutes.
WHAT CONSTITUTES DISPOSABLE INCOME?
- commissions;
- discretionary and non-discretionary bonuses;
- productivity or performance bonuses;
- profit sharing;
- referral and sign-on bonuses;
- moving or relocation incentive payments;
- attendance, safety, and cash service awards;
- retroactive merit increases;
- payment for working during a holiday;
- workers’ compensation payments for wage replacement, whether paid periodically or in a lump sum;
- termination pay (e.g., payment of last wages, as well as any outstanding accrued benefits);
- severance pay; and,
- back and front pay payments from insurance settlements.
Depending on which state you reside in, you can apply for a Head of Household Exemption. Not every state provides this remedy but the exemption can be as high as 90% to 100% of disposable income, or simply the amount determined necessary for the care and support of your family.
The most important thing to remember is that you get yourself the help needed to ensure you obtain the most favorable results based on your state and the federal laws with the help of trained professionals. At Paramount Law we have attorneys that specialize in these areas and are dedicated to getting you the best results possible.