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 Garnishment

What it is:

A wage garnishment is an obligatory payment of a debt where a portion of an employee's paycheck is automatically withheld to pay the debt.

How it works (Example):

Courts can set wage garnishments on individuals who become delinquent on their debt payments. Often, wage garnishments are given out when a person is delinquent on child support, spousal support, taxes or loans. If the debtor has a history of failing to pay, a wage garnishment can be implemented 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 garnishment automatically deducts the $100 from the person's paycheck and sends it to the lender.

Why it Matters:

Wage garnishments are often levied in association with delinquent child support payments and merchant credit balances. Though illegal in some U.S. states, wage garnishments can be a practical means for recovering long-term unpaid debts.