The Heavy Weight of Wage Garnishment Laws

Rachel Linton
SFS ’19

Wage garnishment occurs when a portion of an individual’s paycheck is seized to recover debt, and it has long been a legal measure in the United States. The percentage seized varies depending on the law and the case but can often amount to a sizable segment of the person’s income.

Wage garnishment laws vary from state to state, and consequently have varying effects on the population.  Some states, like North Carolina, have stronger laws to protect debtors.  Although creditors in North Carolina can legally garnish 75% of an individual’s disposable income, this does not include income that goes towards living expenses—which can often encompass a large portion of a paycheck, especially for lower-income individuals.  As a result, creditors typically don’t resort to wage garnishment, as it is unlikely to recoup many funds.[2]Additionally, North Carolina, along with Texas, South Carolina, and Pennsylvania, limit the types of debt that can be seized by wage garnishment.[1]

In other states, however, there are few punishments for debtors, and wage garnishment rates have risen dramatically in the past ten years.  In Utah, anyone who makes more than $180 a week can be taken to court and have their wages garnished.  These orders can last up to six months, and can be renewed if the creditor is still owed money.[3]Utah, like nineteen other states and Washington, DC, only protects the federal minimum wage.

Historically, wage garnishing has been used largely to recover only very specific kinds of debt: child support payments and unpaid taxes.  In recent years, however, it has been used as a means to force payments to a much broader spectrum of sources, from student loans to credit card debt.[1]

The result is that a much larger number of Americans are having their wages garnished.  Since 2006, wage garnishment of student loan debt has risen by 40%.[4]And with the US population of debtors growing and creditors becoming more willing to go to court over the issue, these rates will only continue to rise.  In 2014, it happened to one in ten working Americans between the ages of 35 and 44[1]—and has been linked to rising rates of bankruptcy declaration across the nation.  

Utah, for example, has the second-highest bankruptcy rate in the nation. Because it lacks protections for debtors, many individuals are having their wages garnished beyond a rate that they can afford.  In response, they declare bankruptcy.  And under Chapter 13 bankruptcy, debtors are required to pay back a portion of the debt in monthly installments.  If an individual can’t afford it, they may be forced to declare bankruptcy again, turning a basic amount of consumer debt into a deeper and deeper financial pit. [2]

This is the real danger—it stops an individual from being able to prioritize in times of financial strain.  Individuals who make only enough to cover everyday living expenses can be thrown into the red as a result of any crisis.  Medical bills, funeral expenses, or even a parking ticket can become crippling.  In these circumstances with limited funds, people prioritize food, utilities bills, and housing payments over things like credit card debt.  But when their wages are garnished, they lose control over their own finances and can be shoved into greater financial disaster.

Wage garnishment laws without sufficient consumer protections are devastating precisely for this reason.  Although creditors find the idea of recouping debts to be appealing, measures like wage garnishment ultimately fail to work when debtors simply lack the means to pay.

Ultimately, the way to combat rising bankruptcy levels is to increase debtor protections associated with wage garnishment.  When such measures are limited to collecting child support payments or unpaid taxes, they can be useful.  But once they are extended to more ordinary levels of consumer debt—and allowed to cut into an individual’s living expenses—they can turn a single debt into a cycle of bankruptcy.





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