Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Wage Assignment

What it is:

A wage assignment refers to a forced payment of a financial obligation via automatic withholding from an employee's pay.

How it works (Example):

Courts can subject individuals who become delinquent in their obligations to wage assignments. In most cases, wage assignments are ordered when a person is delinquent on child support, spousal support, taxes or loans. If the obligor shows a history of nonpayment, a wage assignment can be used to automatically subtract money owed from his or her payroll without his or her consent. For example, if an individual becomes delinquent on $100 monthly loan payments, a wage assignment automatically deducts the $100 from the person's weekly or monthly paycheck and sends it to the lender.

Why it Matters:

Wage assignments are frequently ordered in connection with delinquent child support payments and merchant credit balances. Though unlawful in certain U.S. states, wage assignments can be a useful, proactive method for recouping long-term unpaid debts.